Walsh Company manufactures and sells one product. The followinginformation pertains to each of the company’s first two years ofoperations:

Variable costs per unit:
Manufacturing:
Direct materials	$	27
Direct labor	$	13
Variable manufacturingoverhead	$	5
Variable selling andadministrative	$	4
Fixed costs per year:
Fixed manufacturingoverhead	$	400,000
Fixed selling and administrativeexpenses	$	90,000

During its first year of operations, Walsh produced 50,000 unitsand sold 40,000 units. During its second year of operations, itproduced 40,000 units and sold 50,000 units. The selling price ofthe 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.

Year 1 __________

Year 2 __________

b. Prepare an income statement for year 1and year 2.
	Walsh Company Income Statement Year 1 Year 2 Variable expenses Total variable expenses Fixed expenses Total fixed expenses

2. Assume the company uses absorption costing:

a. Compute the unit product cost for year 1 and year 2.(Round your answers to 2 decimal places.)

Year 1_____________

Year 2 _____________

b. Prepare an income statement for year 1 and year 2.(Round your intermediate calculations to 2 decimalplaces)

	Walsh Company Income Statement Year 1 Year 2 Net operating income(loss)

3. Reconcile the difference between variable costing andabsorption costing net operating income in year 1 and year2.

	Year 1	Year 2
Variable Costing Net Operating income (loss)
Absorption Costing Net operating income (loss)