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18-5. Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These
18-5. Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations:
Prior Year | Current Year | |||||
Sales | 2,500 | units | 4,300 | units | ||
Production | 3,400 | units | 3,400 | units | ||
Production cost | ||||||
Factoryvariable (per unit) | $ | 0.60 | $ | 0.60 | ||
fixed | $ | 1,700 | $ | 1,700 | ||
Marketingvariable | $ | 0.40 | $ | 0.40 | ||
Administrativefixed | $ | 500 | $ | 500 |
Required:
1. Prepare an income statement for each year based on full costing.
2. Prepare an income statement for each year based on variable costing.
3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method.
YALE COMPANY Full Costing Income Statement Prior Year Current Year Sales Less: Cost of goods sold Beginning inventory Cost of goods produced Available for sale Less: Ending inventory Cost of goods sold Gross margin Less: Selling and administrative costs Variable Fixed Operating income YALE COMPANY Variable Costing Income Statement Prior Year Current Year Sales Less: Cost of goods sold Beginning inventory Cost of goods produced Available for sale Less: Ending inventory Cost of goods sold Add: Variable selling and administrative Contribution margin Less: Fixed manufacturing costs Less: Selling and administrative costs Fixed Operating income YALE COMPANY Reconciling Difference in Operating Income Between Full and Variable Costing Prior Year Current Year Change in inventory in units x fixed overhead rate 0$ Difference in operating income 0Step by Step Solution
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