costing accounting

No Spacing Heading 1 to 9-25 Variable versus absorption costing. The Tomlinson Company manufactures trendy, high- quality, moderately priced watches. As Tomlinson's senior financial analyst, you are asked recommend a method of inventory costing. The CFO will use your recommendation to prepare Tomlinson's 2017 income statement. The following data are for the year ended December 31, 2017: Beginning inventory, January 1, 2017 90,000 units Ending inventory, December 31, 2017 34,000 units 2017 sales 433,000 units Selling price (to distributor) $24.00 per unit Variable manufacturing cost per unit, including direct materials $5.40 per unit Variable operating (marketing) cost per unit sold $1.20 per unit sold Fixed manufacturing costs $1,852,200 Denominator-level machine-hours 6,300*** Standard production rate 60 units per machine-hour*** Fixed operating (marketing) costs $1,130,000 **** Hint: "6300 machine hours" - since this is the denominator level, it means the company plans/budgets to turn on its machines for 6300 hours. "60 units per machine hour" as this is a "standard", the machine is expected budgeted produce 60 units for every machine hour. Therefore, the budgeted production units or denominator level = 60 units per machine hour x 6300 machine hours = 378,000 units. The company's budgeted production is 378,000 units. Required: Assume standard costs per unit are the same for units in beginning inventory and units produced during the year. Also, assume no price, spending, or efficiency variances. Any production- volume variance is written off to cost of goods sold. I Required: 1a. What is the unit product cost" under (a) variable costing and (b) absorption costing. 1b. Prepare the 2017 income statements under (a) variable costing and (b) absorption costing. 2. Complete equation 1" below: EQUATION/Formula 1 can be used to reconcile the difference between the AC income and the VC income. Equation 1 is from p. 336. AC income - VC income = fixed manufacturing OH cost in ending inventory under AC method - fixed manufacturing OH cost in beginning inventory under AC method Short-hand used in lecture: AC income - VC income = (End units - Beg unit to