Fletcher Company manufactures and sells one product. The following information pertains to each of the companys first two years of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$	28
Direct labor	$	13
Variable manufacturing overhead	$	5
Variable selling and administrative	$	4
Fixed costs per year:
Fixed manufacturing overhead	$	162,000
Fixed selling and administrative expenses	$	70,000

During its first year of operations, Fletcher produced 54,000 units and sold 44,000 units. During its second year of operations, it produced 27,000 units and sold 37,000 units. The selling price of the companys product is $52 per unit.

1.	Assume the company uses variable costing:

a.	Compute the unit product cost for year 1 and year 2.

	Year 1	Year 2
Unit product cost	$	$

b.	Prepare an income statement for year 1 and year 2. (Input all amounts as positive values except losses which should be indicated by a minus sign.)

	Year 1	Year 2
(Click to select)SalesContribution marginFixed selling and administrative expensesVariable selling and administrative expensesFixed manufacturing overheadVariable cost of goods soldNet operating income (loss)	$	$
Variable expenses:
(Click to select)SalesContribution marginFixed manufacturing overheadSales commissionsNet operating income (loss)Variable cost of goods soldFixed selling and administrative expenses
(Click to select)Net operating income (loss)Fixed selling and administrative expensesContribution marginVariable selling and administrative expensesFixed manufacturing overheadSalesSales commissions
Total variable expenses
(Click to select)Gross marginContribution margin
Fixed expenses:
(Click to select)Variable cost of goods soldSalesVariable selling and administrative expensesContribution marginFixed manufacturing overheadSales commissionsNet operating income (loss)
(Click to select)Contribution marginFixed selling and administrative expensesVariable cost of goods soldSalesVariable selling and administrative expensesNet operating income (loss)Sales commissions
Total fixed expenses
(Click to select)Net operating incomeNet operating loss	$	$

2.	Assume the company uses absorption costing:

a.	Compute the unit product cost for year 1 and year 2.

	Year 1	Year 2
Unit product cost	$	$

b.	Prepare an income statement for year 1 and year 2. (Input all amounts as positive values except losses which should be indicated by a minus sign.)

	Year 1	Year 2
(Click to select)Cost of goods soldGross marginSelling and administrative expensesNet operating income (loss)Sales	$	$
(Click to select)SalesCost of goods soldNet operating income (loss)Selling and administrative expensesGross margin
(Click to select)Gross marginContribution margin
(Click to select)Selling and administrative expensesNet operating income (loss)Cost of goods soldGross marginSales
(Click to select)Net operating lossNet operating income	$	$

3.	Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2. (Amounts to be deducted should be indicated with a minus sign.)

	Year 1	Year 2
Variable costing net operating income (loss)	$	$
(Click to select)AddDeduct: (Click to select)Fixed manufacturing overhead cost released from inventory under absorption costingFixed manufacturing overhead cost deferred in inventory under absorption costing
(Click to select)DeductAdd: (Click to select)Fixed manufacturing overhead cost deferred in inventory under absorption costingFixed manufacturing overhead cost released from inventory under absorption costing
Absorption costing net operating income	$	$