Walsh Company manufactures and sells one product.
The following information pertains to each of the company's first two years of operations:
Variable costs per unit:
Manufacturing:
Direct materials $25
Direct labor 15
Variable manufacturing overhead 5
Variable selling and administrative 2
Fixed costs per year:
Fixed manufacturing overhead $250,000
Fixed selling and administrative expenses 80,000
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 $60 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.
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Ответ:
Solution:
Step 1:
To measure the sage unit cost of the year of a commodity, plan the statement below:
Details Year 1 Year 2
Direct materials per unit $25 $25
Add: Direct labour per unit $15 $15
Add: Variable manufacturing overhead per unit $5 $5
Total product cost per unit $45 $45
Thus, the unit product cost under variable costing for yea 1 and year 2 is $45
Step 2:
Variable costing income statement
For the year ended year 1 and year 2
Details Year 1 Year 2
Unit sold (a) 40,000 50,000
Sales [ b=a x 60 each ] 2,400,000 3,000,000
Variable product cost [c=a*45 each] 1,800,000 2,250,000
Variable selling and administrative costs
[d=a*$2] 80,000 1,00,000
Contribution margin [e=b-c-d] 520,000 650,000
Fixed manufacturing overhead [f] 250,000 250,000
Fixed selling and administrative expense [g] 80,000 80,000
Net operating income [e-f-g] $190,000 $320,000
Step 3:
Details Year 1 Year 2
Direct materials per unit $25 $25
Add: Direct labour per unit $15 $15
Add: Variable manufacturing overhead per unit $5 $5
Add: Fixed manufacturing overhead per unit
Year - 1 - ($250,000 + 50,000 units)
Year - 1 - ($250,000 + 40,000 units) $5 $6
Total product cost per unit $50.00 $51.25
Step 4:
Absorption Costing Income Statement
For the years ended Year 1 and Year 2
Details Year 1 Year 2
Number of units produced [a] 50000 40000
Units sold [b] 40000 50000
Sales [c = b x $60 each] $2400000 $3000000
Cost of goods sold:
Beginning inventory [d]
Year - 1 - No Beginning inventory
Year - 2 - (10,000 units x $50.00 each) $0 $500,000
Cost of goods manufactured [e]
Year - 1 - (a x $50.00 each) $2,500,000
Year - 2 - (a x $51.25 each) $2,050,000
Ending inventory [f]
Year - 1 - (10,000 units x $50.00 each) $500,000
Year - 2 - No Ending inventory $ - $ -
Cost of goods sold [g = d + e - f] $2000000 $2550000
Gross margin [h = c - g] $400,000 $450,000
Selling and administrative expenses [i]
[(b x $2 each) + $80,000] $160,000 $180000
Net operating income [h- i] $240000 $270000
Step 5:
Reconciliation of Net Operating Income
Details Year 1 Year 2
Net operating income as per variable costing $190,000 $320,000
Add/(Less): Difference in valuation of inventory due to fixed manufacturing overhead
Year - 1 - [(50,000 units - 40,000 units) x $5.00 each]
Year - 2 - [(50,000 units - 40.000 units) x $5.00 each] $50000 $(50000)
Net operating income as per absorption costing $240000 $270000
Reconciliation of Net Operating Income
Details Year 1 Year 2
Net operating income as per variable costing $190,000 $320,000
Add (Less): Difference in valuation of inventory due to fixed manufacturing overhead
Year - 1 - [(50,000 units - 40,000 units) x $5.00 each]
Year - 2 - [(50,000 units - 40.000 units) x $5.00 each] $50000 $ (50000)
Net operating income as per absorption costing $240000 $270,000
Ответ: