During Denton Companys first two years of operations, the company reported absorption costing net operating income as
Question:
The companys $34 unit product cost is computed as follows:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Variable manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Fixed manufacturing overhead ($350,000 ÷ 25,000 units) . . . . . . . . . . 14
Unit product cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34
Production and cost data for the two years are given below:
Year 1 Year 2
Units produced . . . . . . . . . . 25,000 25,000
Units sold . . . . . . . . . . . . . . 20,000 30,000
Required:
1. Prepare a variable costing income statement for each year in the contribution format.
2. Reconcile the absorption costing and variable costing net operating income figures for eachyear.
Step by Step Answer:
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer