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	$	29
Direct labor	$	17
Variable manufacturing overhead	$	3
Variable selling and administrative	$	2
Fixed costs per year:
Fixed manufacturing overhead	$	400,000
Fixed selling and administrative expenses	$	50,000

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 $59 per unit.

Complete this question by entering your answers in the tabs below.

Reconcile the difference between variable costing and absorption costing net operating income in Year 1 and Year 2 (Enter any losses or deductions as a negative value.)

	Year 1 Year 2 Variable costing net operating income (loss) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing net operating income (loss)

Answer 1

Income Class) 1 Viariable Costing net nopereting Income Inopereting net Years Year 2 49 49 Year 2 Year Variable Coo 29 Direct material Direct labour Variable manufacturing cost Total Pocduct 6 st 49 2) Feд тохиох очахмесо Cos» А.Кезел Javentoog under his booptica Costing. Year Year 2 Loss as per abscopting lasting 8-50,000 $-40000 Difference in closing stock Closing stack as per Absaption $570,000 $570,000 Closing stock ay Pen weariable Catery $ 490,000 $450,000 1 Difference -$80,000 $70,000 Loss as per variable Casting -$130,000 - $1.29,000 Scanned with CamScanner

Year I 1 Year 2 57 Casting Year 17 Year 2 12 Product Cost : Absooption Direct labour Doac 9-aries Traiyle moufacturing Cost Fixed Manfacturing Cost 37 59 Abscoption Costing net offenting less yeara year 2 -$50,000 - $130,000 Scanned with CamScanner