Jellison Company had the following operating data for its first two years of operations:

Variable costs per unit:
Direct materials		4.00
Direct labor		$2.90
Variable overhead		1.50
Fixed costs per year:
Overhead		180,000
Selling and administrative		70,800

Jellison produced 90,000 units in the first year and sold 80,000. In the second year, it produced 80,000 units and sold 90,000 units. The selling price per unit each year was $12. Jellison uses an actual costing system for product costing.

Required:

Question Content Area

1. Prepare income statements for both years using absorption costing. If an amount is zero, enter "0".

	Year 1	Year 2
Sales	$960,000	$1,080,000
Less: Cost of goods sold	Less: Cost of goods sold	Less: Cost of goods sold
Gross profit	$fill in the blank 547f8f04c00a05f_7	$fill in the blank 547f8f04c00a05f_8
Less: Fixed selling and administrative expenses	Less: Fixed selling and administrative expenses	Less: Fixed selling and administrative expenses
Operating income	$fill in the blank 547f8f04c00a05f_12	$fill in the blank 547f8f04c00a05f_13
Cost of goods sold:
Beginning inventory	$Beginning inventory	$Beginning inventory
Cost of goods manufactured	Cost of goods manufactured	Cost of goods manufactured
Goods available for sale	$Goods available for sale	$Goods available for sale
Less: Ending inventory	Less: Ending inventory	Less: Ending inventory
Cost of goods sold	$fill in the blank 547f8f04c00a05f_26	$fill in the blank 547f8f04c00a05f_27

Question Content Area

Has firm performance, as measured by income, improved or declined from Year 1 to Year 2?

Question Content Area

2. Prepare income statements for both years using variable costing. If an amount is zero, enter "0".

	Year 1	Year 2
Sales	$Sales	$Sales
Less: Variable cost of goods sold	Less: Variable cost of goods sold	Less: Variable cost of goods sold
Contribution margin	$fill in the blank 5d610402cfc9fe5_7	$fill in the blank 5d610402cfc9fe5_8
Less:
Fixed overhead	Fixed overhead	Fixed overhead
Fixed selling and administrative expenses	Fixed selling and administrative expenses	Fixed selling and administrative expenses
Operating income	$fill in the blank 5d610402cfc9fe5_15	$fill in the blank 5d610402cfc9fe5_16
Variable cost of goods sold:
Beginning inventory	$Beginning inventory	$Beginning inventory
Variable cost of goods manufactured	Variable cost of goods manufactured	Variable cost of goods manufactured
Goods available for sale	$Goods available for sale	$Goods available for sale
Less: Ending inventory	Less: Ending inventory	Less: Ending inventory
Cost of goods sold	$fill in the blank 5d610402cfc9fe5_29	$fill in the blank 5d610402cfc9fe5_30

Question Content Area

Has firm performance, as measured by income, improved or declined from Year 1 to Year 2?