Reference no: EM132540249

Magna Gaming Consoles Inc. was incorporated on, and began business on January 1, 2019. During the first year of operations, the company produced 5,000 units and sold 4,000 units. In 2020, while production remained constant, unit sales increased by 20% following a reduction in selling price. The following information is available for the two years. 2019 2020 MANUFACTURING COSTS: Direct materials per unit Direct labour per unit Variable manufacturing overhead per unit Fixed manufacturing overhead $75 $50 $30 $200,000 S70 $60 $35 $225.000 SELLING and ADMINISTRATIVE COSTS: Variable 15% of sales Fixed $185,000 15% of sales $200.000 UNIT SELLING PRICE $425 $375

REQUIRED:

Question 1. Calculate the unit cost of production for both years using absorption costing and then using Variable costing

Question 2. Prepare income statements for 2020 using absorption testing and then using Variable costing

Question 3. Reconcile the operating incomes from the income statements in (2) above.