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 Lehightons first two years of operation is as follows Year 1 Year 2 Sales (in units) 2,800 2,800 Production (in units) 3,300 2,300 Production costs Variable manufacturing costs $ 13,530 $ 9,430 Fixed manufacturing overhead 16,830 16,830 Selling and administrative costs Variable 11,200 11,200 Fixed 10,200 10,200 Selected information from Lehightons 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 End of Year 2 Finished goods inventory $ 4,600 $ 0 Retained earnings 14,540 26,780 Based on variable costing End of Year 1 End of Year 2 Finished goods inventory $ 2,050 $ 0 Retained earnings 11,990 26,780 Required Reconcile Lehightons 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) What was Lehightons total operating income across both years under absorption costing and under variable costing What was the total sales revenue across both years under absorption costing and under 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 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

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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

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 Lehightons first two years of operation is as follows:

	Year 1		Year 2
Sales (in units)		2,800		2,800
Production (in units)		3,300		2,300
Production costs:
Variable manufacturing costs	$	13,530	$	9,430
Fixed manufacturing overhead		16,830		16,830
Selling and administrative costs:
Variable		11,200		11,200
Fixed		10,200		10,200

Selected information from Lehightons 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		End of Year 2
Finished-goods inventory	$	4,600	$	0
Retained earnings		14,540		26,780

Based on variable costing	End of Year 1		End of Year 2
Finished-goods inventory	$	2,050	$	0
Retained earnings		11,990		26,780

Required:

Reconcile Lehightons 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)

What was Lehightons total operating income across both years under absorption costing and under variable costing?
What was the total sales revenue across both years under absorption costing and under 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?
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.