Question

10.00 points During Denton Company's first two years of operations, the company reported absorption costing net operating income as follows: Year 1 $ 1,260,000 Year 2 $ 1,890,000 Sales (@ $63 per unit) Cost of goods sold (@ $35 per unit) 700,000 1,050,000 560,000 840,000 Gross margin Selling and administrative expenses 312,000 342,000 Net operating income $ 248,000 $ 498,000 * $3 per unit variable: $252,000 fixed each year. The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($425,000 + 25,000 units) Absorption costing unit product cost Production and cost data for the two years are given below: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000

Answer 1

Variable Costing Yourticular, Income Statement Sales. feam 12 Year 2. 20.000 Unell 80.000 1260,000 1890,000 420800 630,000 E) 840,000 1260.000 Fetal wavulable expenses. Contribution Marogir total settings fixed Cost Wet operating Socome (-) 677000 67407 16900 582000 puebit Reconciliation variable. Costing net operating Incoane, 169 000 583000 Year 1 Year 26 - nixed breduction Everehender - Carried to reara 70000 1 exed herzoduction werhead 70,0to - Casnied from Year 1 03000 653000 The total abscoption Costing Wet operating Sncome. 2.48000 498000 total state, nef operating come unders both methods are samed. com Computation of total variable cost per Unit Direct Materials, Desect Labor u variable manufacturing ever head (+) variable vselling and administratie expenses total variable expenses, $21-00

Compentation fertation of total fixed cost barcoticulars Amoury fixed manufacturing oreshead. 425000 fixed selling og and administration expenses 25260 and administratoes 0 total fixed Cost 0 cost per Unit $ Absorption Cost Cost per Unit variable Costing Direct Material Dixeet Material Direct Labour Direct Labour - Variable manufacture Variable manifacturing Overhead overhead fixed manufacturing variable selling & - Overhead > expensus & Cost per Unit 35 I cost per Unit So all the difference is $14 pero Vnet Administrative calculation of closing stock. (in Units) topening stock (k production e cold closing Steek Year 1 Years 2 NILI 5000 95000 2500 25000 1 30.000 20,000 30.000 5000 INIL

Casing Sex ( 18) Costa de solid 109 Gross Pro A-) 3) value of closing stock. Year 1 peting strek Absorption Costing Yeara (8000 X35) 2175000 NOIL variable Costing (5000x900) WHIL - 105000 the difference between the indo 70,000 M L

In reconciliation part ...the net operating income

Under both methods are same ...

Net operating income total (absorption costing). $746000

(-)Net operating income total (variable costing) $746000

Nil