Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $22 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: Sales (in units) Production (in units) Production costs: Variable manufacturing costs Fixed manufacturing overhead Selling and administrative costs: Variable Fixed Year 1 Year 2 2,400 2,400 3,000 1,800 $11,100 $ 6,660 14,100 14,100 9,600 9,600 8,600 8,600 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 End of Year 2 Finished-goods inventory Retained earnings $ 5,040 8,940 $ e 15,040 Based on variable costing Finished-goods inventory Retained earnings End of Year 1 $ 2,220 6,120 End of Year 2 $ e 15,040 Case 8-43 Analysis of Differences in Absorption-Costing and Variable-Costing Income Statements; Continuation of Preceding Case (LO 8-1, 8-6) 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 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) Sales revenue Cost of goods sold under absorption costing Subtotal Total Operating income under variable costing Difference in operating income Show less A Year 1 Year 2 $ 52,800 $ 52,800 20,160 25,800 $ 0 $ $ 0 $ + 0 0 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was Lehighton's total operating income across both years under absorption costing and under variable costing? Absorption costing Total Operating Income Variable costing Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was the total sales revenue across both years under absorption costing and under variable costing? Total Sales Absorption costing Variable costing Revenue Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? Absorption costing Variable costing Costs Expensed < Required 3 Required 5 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Considering the results obtained in requirements 1-5 above, evaluate the following statements. (Select "Yes" if the statement is true, and "No" if it is not.) Sales revenue is different depending on the costing method used. Timing is the key in distinguishing between absorption and variable costing. Yes No Since Lehighton's combined operating income, across the two-year period, is the same under both absorption and variable costing, then the operating income must be the same within each year under both methods. The difference between absorption and varible costing is caused by the timing with which expenses are recognized. Required 1 Required 2 Required 3 Required 4 Required S Required 6 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 S 2,237 Variable costing S 1,431 Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Considering the results obtained in requirements 1-5 above, evaluate the following statements. (Select "Yes" if the statement is true, and "No" if it is not.) Sales revenue is different depending on the costing method used. Timing is the key in distinguishing between absorption and variable costing. Yes No Since Lehighton's combined operating income, across the two-year period, is the same under both absorption and variable costing, then the operating income must be the same within each year under both methods. The difference between absorption and varible costing is caused by the timing with which expenses are recognized