M Inbox (19) - suttmilb lomework-6-9-30 points Help Save & Exit Submit Walsh Com
ID: 2508954 • Letter: M
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M Inbox (19) - suttmilb lomework-6-9-30 points Help Save & Exit Submit Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations costs per unit Manufacturing Direct materials Direct labor Variable manufacturing overhead 27 s 12 Variable selling and administrative Fixed costs per year: 5328,ee0 s 68,0e6 Fixed manufacturing overhead es During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company's product is $55 per unit Required: 1. Assume the company uses variable costing: Pre 10,1 ??? NextExplanation / Answer
Answer 1-a Unit product cost for Year 1 and Year 2 under Variable Costing Year 1 Year 2 Direct Materials $27.00 $27.00 Direct Labour $12.00 $12.00 Variable Manufacturing Overhead $5.00 $5.00 Unit product cost $44.00 $44.00 Answer 1-b Income statement under Variable Costing Walsh Company Income statement Year 1 Year 2 Sales $2,200,000 $2,750,000 Less : Variable Cost - Production Cost $1,760,000 $2,200,000 - Selling and administrative $160,000 $200,000 Contribution Margin $280,000 $350,000 Less : Fixed cost - Manufacturing Overhead $320,000 $320,000 - Selling and administrative $60,000 $60,000 Net Operating Income -$100,000 -$30,000 Answer 2-a Unit product cost for Year 1 and Year 2 under Absorption Costing Year 1 Year 2 Direct Materials $27.00 $27.00 Direct Labour $12.00 $12.00 Variable Manufacturing Overhead $5.00 $5.00 Fixed Manufacturing Overhead $6.40 $8.00 Unit product cost $50.40 $52.00 Answer 2-b Income statement under Absorption Costing Walsh Company Income statement Year 1 Year 2 Sales $2,200,000 $2,750,000 Less : Cost of goods sold $2,016,000 $2,584,000 Contribution Margin $184,000 $166,000 Less : Selling and administrative cost - Variable cost $160,000 $200,000 - Fixed cost $60,000 $60,000 Net Operating Income -$36,000 -$94,000 Answer 3 Reconcile the difference between variable costing and absorption costing net operating income in year 1 and Year 2 Year 1 Year 2 Variable costing net operating income (loss) -$100,000 -$30,000 Add : Fixed manufacturing overhead cost in ending inventory deferred to Year 2 $64,000 0 Less : Fixed Manufacturing overhead cost component in beginning inventory carried from Year 1 0 $64,000 Absorption costing net operating income (loss) -$36,000 -$94,000
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