Pad 1:53 AM *90%- Question 2 (of 3) Save & Ext Submit 40.00 points Walsh Company
ID: 2553184 • Letter: P
Question
Pad 1:53 AM *90%- Question 2 (of 3) Save & Ext Submit 40.00 points 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 $22 Direct materials Direct labor S 5 S 4 Variable seling and administrative Fixed costs per year S 240,000 Fixed selling and administrative expenses $ 70,000 Foxed manufacturing overhead During its first year of operations, Wailsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 unts and sold 50,000 units. The selling price of the company's product is $57 per unit Required: 1, Assume the company uses variable costing a. Compute the unit product cost for year 1 and year 2 Unit product cost b. Prepare an income statement for year 1 and year 2 Year 2 Variable Total variable expenses Total fixed expenses Net operating income (lossExplanation / Answer
1-a Year 1 Year 2 Amount in $ Direct material 22 22 Direct Labour 13 13 Variable manufacturing overhead 5 5 Product Cost 40 40 * Selling and Administrative cost are not included in Product cost 1-b Waish Company Income Statement Year 1 Year 2 Amount in $ Sales @57/unit 22,80,000 28,50,000 Variable expenses: -Product cost (40/unit) 16,00,000 20,00,000 (40*40000) (40*50000) -Selling and Administrative cost ($4/unit) 1,60,000 2,00,000 (4*40000) (4*50000) Total variable expenses 17,60,000 22,00,000 Contribution margin (Sales-variable cost) 5,20,000 6,50,000 Fixed Expenses: -Fixed manufacturing overhead 2,40,000 2,40,000 -Fixed selling and administrative overhead 70,000 70,000 Total Fixed expenses 3,10,000 3,10,000 Net operating income/Loss 2,10,000 3,40,000 (Contribution margin-Total fixed expenses)
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