Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. T
ID: 2586911 • Letter: Y
Question
Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations:
a.Prepare an income statement for each year based on full costing.
Prepare an income statement for each year based on variable costing.
same table as part A
Prepare a reconciliation and explanation of the difference each year in the operating income resulting from using the full-costing method and variable-costing method. (Negative amounts should be indicated by a minus sign.)
Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations:
Explanation / Answer
a a income statement for each year based on full costing. prior year prior year current year current year sales 1800 5400 2200 6600 less: cost of goods sold cost of production Factory Variable 2000 1200 2000 1200 Factory fixed 2000 1000 2000 1000 available for sale 2000 2200 2000 2200 Less : Ending inventory 200 220 0 0 Begninning Inventory 0 0 200 220 cost of good sold 1800 1980 2200 2420 gross margin 3420 4180 less selling and administrative costs Variable Marketing 720 880 Fixed Administrative 500 500 Total 1220 1380 operating income 2200 2800 b. a income statement for each year based on Variable Costing prior year prior year current year current year sales 1800 5400 2200 6600 Variable cost cost of production Factory Variable 2000 1200 2000 1200 available for sale 2000 1200 2000 1200 Less : Ending inventory 200 120 0 0 Begninning Inventory 0 0 200 120 cost of good sold 1800 1080 2200 1320 gross margin 1800 4320 2200 5280 less selling and administrative costs Variable Marketing 1800 720 2200 880 Contribution Margin 1800 3600 2200 4400 Factory fixed 1000 1000 Fixed Administrative 500 500 operating income 2100 2900 c. Reconciliation and explanation of the difference each year in the operating income resulting from using the full-costing method and variable-costing method. (Negative amounts should be indicated by a minus sign.) prior year current year change in inventory in units 200 -200 multiply times fixed overhead rate 0.5 0.5 difference in operating income 100 -100
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