Chapter 6 Question 3

Walsh Company manufactures and sells one product. The following information pertains to each of the company's rst two years of operations: Variable costs per unit: Manufacturing: Direct materials 5 25 Direct labor 5 13 Variable manufacturing overhead 5 3 Variable selling and administrative $ 2 Fixed costs per year: Fixed manufacturing overhead 5320.000 Fixed selling and administrative expenses 5 90,000 During its rst year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company's product is $58 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 Year1 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 Year1 and Year 2. 3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1. Req 1A Req 1B Req 2A Req 2B Req 3 Assume the company uses variable costing. Compute the unit product cost for year 1 and year 2. Year 1 Year 2 Unit product costAssume the company uses variable costing. Prepare an income statement for Year 1 and Year 2. Walsh Company Income Statement Year 1 Year 2 Net operating income (loss)Req 1A Req 1B Req 2A Req 2B Req 3 Assume the company uses absorption costing. Compute the unit product cost for Year 1 and Ye Year 1 Year 2 Unit product costReq 1A Req 1B Req 2A Req 2B Req 3 Assume the company uses absorption costing. Prepare an income statement for Year 1 and Walsh Company Income Statement Year 1 Year 2Req 1A Req 1B Req 2A Req 2B Req 3 Reconcile the difference between variable costing and absorption costing net operating income in Year 1. (Enter any losses or deductions as a negative value.) Year 1 Year 2 Variable costing net operating income (loss) Absorption costing net operating income (loss)