Question

Question Help Hardwick Manufacturing manufactures a single product that it will sell for $91 per unit. The company is looking to During its first year of operations, the company plans to manufacture 21,000 units and anticipates selling 18,000 of project is operating income for its first two years of operations. Cost information for the single unit of its product is those units. During the second year of its operations, the company plans to manufacture 21.000 units and as follows: anticipates selling 23,000 units ( has units in beginning inventory for the second year from its first year of (Click the icon to view the data) operations) Read the requirements Requirement 1. Prepare an absorption costing income statement for (a) the first year of operations and (b) the second year of operations. Hardwick Manufacturing Income Statement(Absorption Costing) (a) Year 1 b) Year 2 Los Requirement 2. Before you prepare the variable costing income statements for Hardwick, predict the company's operating income using variable costing for both its first year and its second year without preparing the variable costing Income statements. Mint Calculate the variable costing operating income for a given year by taking that year's absorption costing operating income and adding or subtracting the difference in operating income as calculated using the following formula: Difference in operating income (Change in inventory level in units x Flved MOH per unit) Begin by calculating the difference in income each year using the formula provided Choose from any list or enter any number in the input fields and then continue to the next question

Answer 1

Part 1

	Year 1	Year 2
Fixed manufacture overhead	210,000	210,000
Divided by: units produced	21,000	21,000
Fixed manufacture overhead per unit	$            10.00	$              10.00
Direct material cost	$            38.00	$              38.00
Direct labor	17.00	17.00
Variable manufacture overhead	11.00	11.00
Fixed manufacture overhead per unit	10.00	10.00
Units Product Cost under absorption costing	$            76.00	$              76.00
Absorption costing Income statement
	Year 1	Year 2
Units sold	18,000	23,000
Sales revenue (Units sold * 91)	$    1,638,000	$     2,093,000
Less: Cost of goods sold (Units sold * 76)	1,368,000	1,748,000
Gross Margin	270,000	345,000
Less: Selling and administrative expense ((Units sold * 2)+84000)	120,000	130,000
Operating income	$        150,000	$         215,000

Part 2

	Year 1	Year 2
Beginning inventory in units	0	3,000
Add: Units Produced	21,000	21,000
Less: Units sold	(18,000)	(23,000)
Ending inventory in units	3,000	1,000

	Decrease (increase) In inventory	Fixed OH per uit	Difference in operating income
Year 1 (0-3000)	-3000	$                  10	$         (30,000)
Year 2 (3000-1000)	2000	$                  10	$           20,000

Year	Operating income under variable costsing	Remarks
Year 1	$120,000	150000-30000
Year 2	$235,000	215000+20000

Part 3

	Year 1	Year 2
Direct material cost	$            38.00	$              38.00
Direct labor	17.00	17.00
Variable manufacture overhead	11.00	11.00
Units Product Cost under variable costing	$            66.00	$              66.00
Variable costing Income statement
	Year 1	Year 2
Units sold	18,000	23,000
Sales revenue (Units sold * 91)	$    1,638,000	$     2,093,000
Less: Variable cost
Variable manufacture costs (Units sold * 66)	1,188,000	1,518,000
Variable selling and administrative (Units sold * 2)	36,000	46,000
Total variable cost	1,224,000	1,564,000
Contribution margin	414,000	529,000
Less: fixed cost
Fixed manufacture overhead	210,000	210,000
Fixed selling and administrative expense	84,000	84,000
Total fixed cost	294,000	294,000
Operating income	$        120,000	$         235,000