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 $ 27 Direct labor $ 10 Variable manufacturing overhead $ 2 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 240,000 Fixed selling and administrative expenses $ 80,000 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 $51 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.

Compute the unit product cost for year 1 and year 2. (Round your answer to 2 decimal places.)

         

Prepare an income statement for year 1 and year 2. (Round your intermediate calculations to 2 decimal places)

         

Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2.

2. Assume the company uses absorption costing:

Explanation / Answer

2) Assume the company uses absorption costing:

a) Compute the unit product cost for year 1 and year 2. (Round your answer to 2 decimal places.)

b) Prepare an income statement for year 1 and year 2. (Round your intermediate calculations to 2 decimal places)

3) Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2.

Year 1 Year 2 Direct material 27 27 Direct labour 10 10 Variable manufacturing overhead 2 2 Fixed manufacturing overhead 4.80 6 Total unit product cost 43.80 45

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