UniCom
UniCom produces a wide range of consumer electronics. UniCom’s Newark, New York, plant produces two types of cordless phones: 2.4 GHz and 6.0 GHz. The following table summarizes operations at the Newark UniCom plant for the years 2012 and 2013.
| 2012 | 2013 | ||
| 2.4 GHz | 6.0 Ghz | 2.4 GHz | 6.0 Ghz |
Units produced | 120,000 | 70,000 | 90,000 | 50,000 |
Units sold | 100,000 | 60,000 | 100,000 | 60,000 |
Change in inventory (units) | 20,000 | 10,000 | −10,000 | −10,000 |
Variable manufacturing cost per unit: |
|
|
|
|
Direct labor | $7.50 | $8.00 | $7.50 | $8.00 |
Direct material | $18.00 | $24.00 | $18.00 | $24.00 |
Variable overhead | $2.00 | $3.00 | $2.00 | $3.00 |
Selling price | $45.00 | $78.00 | $45.00 | $78.00 |
Fixed manufacturing overhead amounted to $4 million in each year. At the start of 2012, there were no beginning inventories of either 2.4-GHz or 6.0-GHz cordless phones. UniCom uses FIFO to value inventories.
Required:
a. Prepare variable costing income statements for 2012 and 2013.
b. Prepare absorption costing income statements for 2012 and 2013. At the end of the year, fixed manufacturing overhead is absorbed to the two phone models using direct material as the allocation base.
c. Prepare a table that reconciles any differences in variable costing and absorption costing net incomes for 2012 and 2013.
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