Comprehensive Problem on Process Costing, Variable Costing, and Full- Absorption Costing: (This problem requires knowing how to compute equivalent units.) Whitaker Corporation manufactures Jink, which is sold for $20 per unit. Harsh (a direct material) is added before processing starts, and labor and overhead are added evenly during the manufacturing process. Actual costs per unit of Jink this year are: 

These costs have remained the same for several periods. Inventory data for this year follows:

During the year, 220,000 pounds of Harsh were purchased, and 230,000 pounds were transferred to work in process inventory. Also, 1 10,000 units of Jink were transferred to finished goods inventory. Actual fixed manufacturing overhead during the year was $121,000. FIFO is used for inventory flows. Marketing and administrative costs were $145,000 for the year.

Required:

a. Determine the number of equivalent units produced for both materials (Harsh) and conversion costs.

b. Determine the work in process and finished goods inventories (in dollars) under (1) full-absorption costing and (2) variable costing on January I and December 31.

c. Prepare comparative income statements for the year, using full-absorption and variable costing.

d. Prepare a reconciliation of full-absorption to variable costing that compares the fixed manufacturing costs deducted from revenue (that is, expensed) under each method.

Transcribed Image Text:

Harsh, 2 pounds Labor Variable manufacturing overhead Fixed manufacturing overhead $3.00 6.00 1.00 1.10