Borunda Corporation has provided the following data for its two most recent years of operation: Selling price...

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Accounting

Borunda Corporation has provided the following data forits two most recent years of operation:
Selling price per unit
$83
Manufacturing costs:
Variable manufacturing cost per unitproduced:
Direct materials
$9
Direct labor
$7
Variable manufacturing overhead
$3
Fixed manufacturing overhead per year
$360,000
Selling and administrative expenses:
Variable selling and administrative expense per unitsold
$6
Fixed selling and administrative expense peryear
$77,000
Year 1
Year 2
Units in beginning inventory
0
2,000
Units produced during the year
10,000
12,000
Units sold during the year
8,000
12,000
Units in ending inventory
2,000
2,000
Required:
a. Assume the company uses absorption costing. Preparean income statement for each year.
b. Assume the company uses variable costing. Prepare anincome statement for each year.
c. Prepare a report in good form reconciling thevariable costing and absorption costing net incomes.

Answer & Explanation Solved by verified expert

3.9 Ratings (784 Votes)

Note 1 Unit product cost under absorption costingThis note is for understanding only Particulars Year 1 Year 2 Direct Material 9 9 Direct Labour 7 7 Variable Manufacturing OH 3 3 Fixed manufacturing OH 36 36000010000 30 36000012000 Unit product Cost 55 49 1 Operating Income See Answer

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	Selling price per unit	$83

	Manufacturing costs:
	Variable manufacturing cost per unitproduced:
	Direct materials	$9
	Direct labor	$7
	Variable manufacturing overhead	$3
	Fixed manufacturing overhead per year	$360,000
	Selling and administrative expenses:
	Variable selling and administrative expense per unitsold	$6
	Fixed selling and administrative expense peryear	$77,000

	Year 1	Year 2
Units in beginning inventory	0	2,000
Units produced during the year	10,000	12,000
Units sold during the year	8,000	12,000
Units in ending inventory	2,000	2,000