Walsh Company manufactures and sells one product. The followinginformation pertains to each of the...

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Accounting

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 $ 25
Direct labor $ 12
Variable manufacturing overhead $ 2
Variable selling and administrative $ 1
Fixed costs per year:
Fixed manufacturing overhead $ 400,000
Fixed selling and administrative expenses $ 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 $51 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.
3. Reconcile the difference between variable costing and absorptioncosting net operating income in Year 1.

Answer & Explanation Solved by verified expert

3.8 Ratings (593 Votes)

unit product cost a Year 1 Year 2 unit product cost 39 39 notes Direct materials 25 direct labor 12 Variable manufacturing overhead 2 unit product cost 39 b income statement year 1 year 2 Sales 40000515000051 2040000 2550000 Variable expenses Variable See Answer

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In: AccountingWalsh Company manufactures and sells one product. The followinginformation pertains to each of the company’s...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$25Direct labor$12Variable manufacturing overhead$2Variable selling and administrative$1Fixed costs per year:Fixed manufacturing overhead$400,000Fixed selling and administrative expenses$90,000During 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 $51 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 2.3. Reconcile the difference between variable costing and absorptioncosting net operating income in Year 1.


Variable costs per unit:
Manufacturing:
Direct materials	$	25
Direct labor	$	12
Variable manufacturing overhead	$	2
Variable selling and administrative	$	1
Fixed costs per year:
Fixed manufacturing overhead	$	400,000
Fixed selling and administrative expenses	$	90,000