Current Designs' CFO retrieved the following information with respect to the top-selling rotomoulded kayaks product line from the income statements for the last two years. During these two years it produced 3,000 units in the first year and 2,400 in the second year, while sales were 2,400 units in the first year and 2,700 in the second year. Variable production costs were $570 per unit during both years (direct materials $200, direct labour $175, and variable overhead $195). The company uses first-in, first-out (FIFO) for inventory costing. The absorption costing comparative income statements for these two years were:

Instructions
(a) Using the information provided, prepare condensed, two-year comparative income statements using the variable-costing method. Reconcile the variable-costing income with the absorption-costing income.
(b) Assume that Current Designs uses a normal-costing method. The company had budgeted 3,300 units of production for each of the two years. Prepare condensed, two-year comparative income statements using the normal-costing method. Reconcile the variable-costing in- come with the normal-costing income statements.
(c) Using the information provided above, prepare condensed, two- year comparative income statements using the throughput-costing method. Reconcile the normal-costing income statements with the throughput-costing income statements.

Transcribed Image Text:

Year 1 Year 2 Sales Less cost of goods sold: $2,280,000 $2,565,000 Beginning inventory Product costs 2,400,000 480,000 480,000 2,058,000 257,250 2,280,750 S 284,250 Ending inventory 1,920,000 360,000 Gross profit Less operating expenses (selling and administrative) Variable Fixed 20,000 30,000 135,000 30,000 150,000 $ 210,000 165,000 $ 119,250 Operating income