Fanning Manufacturing pays its production managers a bonus based on the company's profitability. During the two most recent years, the company maintained the same cost structure to manufacture its products.

Year

Units Produced

Units Sold

Production and Sales

Year 2

4,000

4,000

Year 3

6,000

4,000

Cost Data

Direct materials

$

13.20

per unit

Direct labor

$

23.40

per unit

Manufacturing overheadvariable

$

11.90

per unit

Manufacturing overheadfixed

$

106,200

Variable selling and administrative expenses

$

8.00

per unit sold

Fixed selling and administrative expenses

$

60,000

(Assume that selling and administrative expenses are associated with goods sold.)

Fanning sells its products for $108.70 per unit.

Required

a.Prepare income statements based on absorption costing for Year 2 and Year 3.

b.Since Fanning sold the same number of units in Year 2 and Year 3, why did net income increase in Year 3?

d.Determine the costs of ending inventory for Year 3.

e.Prepare income statements based on variable costing for Year 2 and Year 3.

Complete this question by entering your answers in the tabs below.

Req A Year 2

Req A Year 3

Req B

Req D

Req E Year 2

Req E Year 3

Prepare income statements based on absorption costing for Year 2.(Do not round intermediate calculations.)