Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $24 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process Inventory. The actual application rate for manufacturing overhead is computed each year, actual manufacturing overhead is divided by actual production (In units) to compute the application rate. Information for Lehighton's first two years of operation is as follows: Year 1 2,300 2,800 Year 2 2.200 1,800 Sales (in units) Production (in units) Production costs: Variable manufacturing costs Fixed manufacturing overhead Selling and administrative costs: Variable Fixed $13, 160 15.960 S 8.460 15.960 9.2009 B, 200 .200 B, 200 Selected Information from Lehighton's year-end balance sheets for its first two years of operation is as follows: LEHIGHTON CHALK COMPANY Selected Balance Sheet Information Based on absorption costing End of Year 1 Finished-goods inventory $5.200 Betained earnings B, 3B0 End of Year 2 $ 0 13,860 Based on variable costing Finished-goods inventory Betained earnings End of Year 1 $ 2, 350 5,520 End of Year 2 $ 0 13,860 Required: 1. Reconcile Lehighton's operating Income reported under absorption and variable costing, during each year, by comparing the following two amounts on each Income statement: Cost of goods sold . Fixed cost (expensed as a period expense) 2 What was Lehighton's total operating Income across both years under absorption costing and under variable costing? 3. What was the total sales revenue across both years under absorption costing and under variable costing? 4. What was the total of all costs expensed on the operating Income statements across both years under absorption costing and under variable costing? 5. Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3) (a) under absorption costing and (b) under variable costing. 6. Considering the results obtained in requirements 1-5 above, evaluate the following statements. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement: Cost of goods sold Fixed cost (expensed as a period expense) Show less Year 1 Year 2 Cost of goods sold under absorption costing Variable manufacturing costs under variable costing Subtotal Fixed manufacturing overhead as period expense under variable costing Total Operating income under variable costing Less: Operating income under absorption costing Difference in operating income OS What was Lehighton's total operating income across both years under absorption costing and under variable costing? Total Operating Income Absorption costing Variable costing What was the total sales revenue across both years under absorption costing and under variable costing? Total Sales Revenue Absorption costing Variable costing What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? Costs Expensed Absorption costing Variable costing Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3): (a) under absorption costing and (b) under variable costing. Amount Absorption costing Variable costing
