Just need 2b finished and 5B. pleaseee
Starfax, Inc., manufactures a small part that is widely used in various electronic products such as home computers. Results for the first three years of operations were as follows (absorption costing basis) Year 1 Year 2 Year Sales $ 841,600 $ 623,280 $ 841,600 Cost of goods sold 610, 168 420, 890 652,240 Gross margin 231,440 252,480 189, 360 Selling and administrative expenses 199,880 189360 178,840 Not operating income (Loss) $ 31,560 $ 63,120 $ 110,520 at ences In the latter part of Year 2. a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% during Year 2 even though production increased during the year. Management had expected sales to remain constant at 52,600 units, the increased production was designed to provide the company with a buffer of protection against unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unlikely. To reduce the excessive inventories, Starfax cut back production during Year 3. as shown below: Year 1 52,680 63,120 Sales units 42,080 52,600 42,080 52,500 Year 2 Year Production in units Additional Information obout the company follows: a. The company's plant is highly automated. Variable manufacturing expenses (direct materials, direct labor, and variable manufacturing overhead) total only $2.00 per unit. and fixed manufacturing overhead expenses total $504,960 per year b. A new fixed manufacturing overhead rate is computed each year based on that year's actual fixed manufacturing overhead costs divided by the actual number of units produced Vatlable selling and administrative expenses were $i per unit sold in each year Fixed selling and administrative expenses totaled $142.080 per year divided by the actual number of units produced Variable selling and administrative expenses were $1 per unit sold in each year. Fixed selling and administrative expenses totaled $142,080 per year. d. The company uses a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, It assumes that the oldest units in inventory are sold first.) Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurred during Year 3 when sales recovered to previous levels Required: 1. Prepare a variable costing Income statement for each year. 2. Refer to the absorption costing income statements above a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed, b. Reconcile the variable costing and absorption costing net operating income figures for each year. 55. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or foss) have been in each year under absorption costing? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Red 2A Reg 28 Rea 5B Reconcile the variable costing and absorption costing net operating income figures for each year. (Enter any losses or deductions as a negative value) Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes Year 1 Year 2 Year 3 Variable costing not operating Income (lossy $ 36 760 $(100 000) $ 36,760 Add (deduct) fixed manufacturing overhead deferred in released from inventory 0 Absorption costing net operating income (los) S 36,760 % Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Reg 58 IF Lean Production had been used during Year 2 and Year 3, what would the company's net operating Income (or loss) have been in each year under absorption costing? Year Year 2 Year 3
