Dexter Corporation produces and sells a single product, a wooden hand loom for w

Question

Dexter Corporation produces and sells a single product, a wooden hand loom for weaving small items such as scarves. Selected cost and operating data relating to the product for two years are given below:

Selling price per unit ........... $50

Manufacturing costs:

Variable per unit produced:

Direct materials.......... $11,000

Direct labor.......... $6,000

Variable manufacturing overhead.......... $3,000

Fixed manufacturing overhead per year.......... $120,000

Selling and administrative expenses:

Variable per unit sold.......... $4

Fixed per year.......... $70,000

Year 1 year 2

Units in beginning inventory.......... 0 2000

Units produced during the year.......... 10,000 6,000

Units sold during the year.......... 8,000 8,000

Units in ending inventory.......... 2,000 0

Required: Just two income statements + reconsile

1. Assume the company uses absorbtion costing.

a. Compute the unit product cost in each year.

b. Prepare an income statement for for each year.

2. Assume the company uses variable costing.

a. Compare the unit product cost in each year.

b. Prepare an income statement for each year.

3. Reconsile the variable costing and absorption costing net operating incomes.

Do only year one

Explanation / Answer

As the calculations are to be performed for Year 1 only (stated in the question), the same has been given below.

Part 1)

The unit product cost for Year 1 is calculated as follows:

________

The absorption costing income statement for Year-1 is given as follows:

________

Part 2)

The unit product cost for each year is calculated as follows:

________

The variable costing income statement for Year-1 is given as follows:

________

Part 3)

The reconciliation is given as follows:

Year 1 Direct Material 11 Direct Labor 6 Variable Manufacturing Overhead 3 Fixed Manufacturing Overhead 12 (120,000/10,000) Absorption Costing Unit Product Cost $32

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.