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 28 Direct labor 15 Variable manufacturing overhead Variable selling and administrative Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses 6 5 $320,000 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 $58 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. 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 3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1. Complete this question by entering your answers in the tabs below. Req 3 Req 2B Req 2A Req 1B Req 1A mitinn Prenare an income statement for Year 1 and Year 2. (Round your intermediate

Answer 1

In absorption costing income statement please add variable and fixed selling and adm.exp. to get one figure and fit in your format.

Walsh company Variable costing Absorption costing Year 1 Year 1 28 DM -220000 Year 2 28 15 6 15 DM DL Var.mfg. OH Product cost per unit DL 6 49 Var. mfg. OH Fixed mfg. OH (320000 / 50000) Product cost per unit 64000 -156000 6.4 55.4 Reconciliation Year 1) Year 2 Variable costing NOL 15 Add:- Fixed Mfg. OH deferred in inventory 6 (10000 * 6.4) 8 (320000 / 40000) Absorption costing NOI 57 Reconciliation ( Year 2) Variable costing NOI Year 2 Less:- Fixed Mfg. OH released from inventory (10000 * 8) 2900000 Absorption costing NOI Selling and adm. Are period costs and not product costs Absorption costing -180000 Variable Costing Year 1 40000 2320000 80000 -260000 2216000 2850000 Year 1 Year 2 40000 50000 2320000 2900000 1960000 2450000 200000 250000 160000 200000 320000 320000 60000 60000 -220000 -180000 Units sold Sales Less:- Cost of Goods Sold Less: COGS 40000 * 55.4) (50000 * 57) Gross Profit Less:- Selling and administrative Variable Fixed Net income Units Sales Less:- Variable COGS ( 49 * units sold) Variable S and A expenses Contribution Margin Fixed Mfg. OH Fixed S and A expenses Net Income/ (loss) 104000 50000 200000 60000 -156000 250000 60000 260000 In your answer, the figures of year 1 are entered in year 2 column and vice cersa.