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Hammock Manufacturing manufactures a single product that it will sell for $74 per unit. The company is looking to project its operating income for its first two years of operations. Cost information for the single unit of its product is as follows During its first year of operations, the company plans to manufacture 24,000 units and anicipates selling 22.000 of those units. During the second year of its operations, the company plans to manufacture 24,000 units and anticipates selling 25.000 units (t has units in beginning inventory for the second year from its first year of operations) Read the requirements (Click the lcon to view the data.) Requirement 1. Prepare an absorption costing income statement for (a) the first year of operations and (b) the second year of operations Hammock Manuftacturing Income Statement (Absorption Costing) (a) Year 1 (b) Year 2 Sales revenue 1628000 Cost of goods sold Less: Gross profi Less Operating expenses Operating income he rooarements Requirement 2. Before you prepare the variable costing income statements for Hammock, predict the company's operating income using variable costing for both its frst year and its second year without preparing the variable costing income statements. Hint Caloulate the variable costing operating income for a given year by taking that year's absorption costing operating income and adding or subtracting the difference in operating income as caloulated using the following formula: Difference in operating income (Change in inventory level in untsx Fired MOH per unit). Begin by calculating the difference in income each year using the formula provided Change in inventory Fixed MOH Difference in level in units Year per unit operating income 2 Now predict Hammock's operaling income under variable costing for both ts first year and ts second year of operations Operating income Year under variable costing 1 2 Read the requirements. Requirement 3. Prepare a variable costing income statement for (a) the first year of operations and (b) the second year of operations. Hammock Manufacturing rary Contribution Margin Income Statement (Variable Costing) r (a) Year 1 (b) Year 2 Less Less it will sell for $74 per unit. The t two years of operations. Cost During its first year of operations, the anticipates selling 22,000 of those unit company plans to manufacture 24,000 in beginning inventory for the second y Read the requirements More Info ent Direct material per unit produced $31 Direct labor cost per unit produced $10 Variable manufacturing overhead (MOH) per unit produced $4 Variable operating expenses per unit sold $2 Fixed manufacturing overhead (MOH) for each year is $384,000, while fixed operating expenses for each year will be $82,000. Done Print
