Reference no: EM132452262
Question: Walsh Company manufactures and sells one product. The following Information pertains to each of the company's first two years operations:
| Variable costs per unit: |
|
| Manufacturing: |
|
| Direct Materials |
$26 |
| Direct labor |
$14 |
| Variable manufacturing overhead |
$4 |
| Variable selling and administration |
$3 |
| Fixed costs per year: |
|
| Fixed manufacturing overhead |
$320,000 |
| Fixed selling and administration |
$60,000 |
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 $88 per unit.
Required
Question 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.
Question 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.
Question 3. Reconcile the difference between variable costing and absorption costing net operating Income in Year 1.