Walsh Company manufactures and sells one product. The following information pert
ID: 2553734 • Letter: W
Question
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
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 $54 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.
Variable costs per unit: Manufacturing: Direct materials $ 20 Direct labor $ 12 Variable manufacturing overhead $ 2 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 240,000 Fixed selling and administrative expenses $ 90,000Explanation / Answer
1. If Company Uses Variable Costing
a. Statement showing Product Cost for Year 1 and Year 2
b Income Statement
2. If Company Uses Absorption Costing
a. Unit Product Cost
b. Income statement remain same in absrptoion costing
Particulars Year 1 Year 2 Direct Materials Per Unit 20 20 Direct Labour 12 12 Variable Manufacturing Overhead 2 2 Variable Selling and Admin 1 1 Total Variable Cost 35 35Related Questions
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