Refer to the information given in the preceding case for Lehighton Chalk Company.
Required:
1.Reconcile Lehighton’s income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement:
• Cost of goods sold
• Fixed cost (expensed as a period expense)
2.What was Lehighton’s total income across both years under absorption costing and under variable costing?
3.What was the total sales revenue across both years under absorption costing and under variable costing?
4.What was the total of all costs expensed on the income statements across both years under absorption costing and under variable costing?
5.Subtract the total costs expensed across both years [requirement (4)] from the total sales revenue across both years [requirement (3)]: (a) under absorption costing and (b) under variable costing.
6. Comment-on the results obtained in requirements (1), (2), (3), and (4) in light of the following assertion: Timing is the key in distinguishing between absorption and variable costing.
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