iPad 10:55 AM Files % Assignment 5-Inventory Valuation-Spring 2017.docx Western

Question

iPad 10:55 AM Files % Assignment 5-Inventory Valuation-Spring 2017.docx Western Shore Company produces an environmentally friendly cleaning material, which it sells wholesale at a price of S50 per case. The firm uses budgeted production volume as the denominator for allocating fixed manufacturing overhead. Production volume, sales volume, and costs for the first two years of the firm's operations are presented below. (Assume that actual budgeted amounts and that there is no beginning finished goods inventory in year 1. The firm uses FIFO method for accounting for inventory.) Year 1 Year 2 Sales (in units) Production (in units) Production costs: 2,800 3,200 3,200 2,800 Variable manufacturing costs S16,800 $16,240 Fixed manufacturing $48,000 Selling and administrative costs: overhead $48,000 Variable 8,960 S 8,400 Fixed $20,000 $20,0 REQUIRED: Create absorption-costing and variable-costing income statements for Year 1 and Year 2 Courses Calendar To Do Messages

Explanation / Answer

Variable Costing Income Statement Year 1 Year 2 Selling Price                      50                      50 Sales Units                2,800                3,200 Sales Value          1,40,000          1,60,000 Opening Inventory                3,150 Production Variable Cost             14,700             16,240 S&D variable Cost                7,350                8,960 Contribution          1,17,950          1,31,650 Fixed Manufacturing Ohs             48,000             48,000 Fixed S&D Ohs             20,000             20,000 Profit             49,950             63,650 Inventory Units                   400                       -   Production variable Cost                2,100                       -   S&D Variable Cost                1,050                       -   Total Inventory Cost                3,150                       -   Absorption Costing Income Statement Year 1 Year 2 Selling Price                      50                50 Sales Units                2,800          3,200 Sales Value          1,40,000    1,60,000 Opening Inventory                       -         11,650 Production Variable Cost             16,800       16,240 S&D variable Cost                8,400          8,960 Fixed Manufacturing Ohs             48,000       48,000 Fixed S&D Ohs             20,000       20,000             93,200       93,200 Units Produced                3,200          2,800 Per unit cost                      29             81,550                33       93,200 Profit             58,450       55,150 Inventory Units                   400                       -   Total Inventory Cost                      29             11,650

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