Walsh Company manufactures and sells one product. The following information pert

Question

Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations: Variable costs per unit: Manufacturing: Direct materials 24 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $320,000 $ 70,000 its first year of operations, Walsh produced 50.000 units and sold 40,000 units. During its second year of operations, t produced 40,000 units and sold 50,000 units. The selling price of the company's product is $59 per unit. Required 1. Assume the company uses variable costing a. Compute the unit product cost for Year 1 and Year 2 b. Prepare an income statement for Year 1 and Year 2. 2. Assume the company uses absorption costing a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2 3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1 Answer is not complete. Complete this question by entering your answers in the tabs below. ? Protectpdf ^ ug Bright Purples..-.pdf CHM 111 Exam ....pdf Presentation 101.pdf ? Eg

Explanation / Answer

Construct The Absorption Costing Unit Product Cost Year 1 Year 2 Direct Material 24 24 Direct labour 10 10 Variable Manufacturing overheads 3 3 Fixed Manufacturing overheads 6.40 8.00 Absorption costing unit prroduct cost 43.40 45.00 Construct the Absorption Costing Income Statement Under FIFO Year 1 Year 2 Sales $2,360,000 $2,950,000 Cost of Goods sold 1736000 2234000 Gross Margin $624,000 $716,000 Selling and distribution expense 150,000 170,000 Net operating income 474,000 546,000 Note: Cost of goods sold for Year-2 Units currenproduction (40000 units @45) 1,800,000 Add: Units of previous year (10000 units @43.40) 434,000 Total cost of Goods sold 2,234,000 Compute the Variable costing Unit Product cost Year 1 Year 2 Direct Material 24 24 Direct labour 10 10 Variable Manufacturing overheads 3 3 Variable costing unit prroduct cost 37 37 Construct The Variable Costing Income Statement under FIFO YEAR 1 YEAR 2 Sales 2,360,000 2,950,000 Less: Variable cost    variable cost of goods sold 1,480,000 1,850,000    Variable selling expense 80,000 1,560,000 100,000 1,950,000 Contribution margin 800,000 1,000,000 Fixed expense:    Fixed Manufacturing overheads 320,000 320,000    Fixed selling expense 70,000 70,000 Net operating Income 410,000 610,000 Reconciliation Statemnet: Year 1 Year2 Net Income during the year 410000 610000 Add: Fixed OH deffered in Year 1 (10000 units @6.40) 64000 Less: Fixed OH released in Beg. Inv. In Year-2 64000 Net Income under Absorption costing 474000 546000

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