Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $27 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 1Year 2
Sales (in units)3,0003,000
Production (in units)3,4002,600
Production costs:
Variable manufacturing costs.$18,360$14,040
Fixed manufacturing overhead22,44022,440
Selling and administrative costs:
Variable12,00012,000
Fixed11,00011,000
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 costingEnd of Year 1End of Year 2
Finished-goods inventory$4,800$0
Retained earnings16,50030,520
Based on variable costingEnd of Year 1End of Year 2
Finished-goods inventory$2,160$0
Retained earnings13,86030,520
- Prepare operating income statements for both years based on absorption costing.
Requiredl H Required2 H Required3 | Prepare operating income statements for both years based on absorption costing. Cost of goods available for sale Cost of goods manufactured Sales revenue Selling and administrative expenses Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Cost of goods sold: 0 0 Beginning finished-goods inventory Cost of goods available for sale Cost of goods manufactured 0 0 Cost of goods sold 0 0Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. Castorgoodssold: __ Beginning finished-goods inventory Cost of goods available for sale Cost of goods manufactured Cost of goods sold Required 2 > Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. Cost or goods sold: __ Beginning finished-goods inventory Cost of goods available for sale Cost of goods manufactured Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. Cost of goods sold: Beginning finished-goods inventory Cost of goods available for sale Cost of goods manufactured Required 2 > Cost of goods sold Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Cost of goods sold: $ 0 $ 0 0 $ 0 Beginning finished-goods inventory 0 $ 0 Cost of goods available for sale Required 1 Required 2 > Cost of goods manufactured fact of anne coldRequired 1 Required 2 Required 3 | Prepare operating income statements for both years based on absorption costing. cost orgoods sold: __ Contribution margin Contribution loss Gross margin Gross loss Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Cost of goods sold: $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Cost of goods available for sale Required 1 Required 2 > Cost of goods manufactured Sales revenue Selling and administrative expensesRequired 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Cost of goods sold: $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Required 1 Required 2 Required 3 Prepare operating income statements for both years based on variable costing. Cost of goods available for sale Cost of goods manufactured Sales revenue Selling and administrative expenses Total variable costs: -Required 1 Required 2 -Required 3 Prepare operating income statements for both years based on variable costing. Beginning finished-goods inventory Cost of goods available for sale Cost of goods manufactured Cost of goods sold Fixed costs: ( Required1 Required3 > Required 1 Required 2 Required 3 Prepare operating income statements for both years based on variable costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Cost of goods sold: 0 $ 0 Beginning finished-goods inventory Cost of goods available for sale Cost of goods manufactured 0 0 0 EA 0 Cost of goods sold Total fixed costs $ 0 $ 0 $ 0 EA 0 Required 1 Required 2 Required 3 Prepare operating income statements for both years based on variable costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Cost of goods sold: $ 0 $ 0 Beginning finished-goods inventory 0 0 Cost of goods available for sale 0 EA 0 Cost of goods manufactured Cost of goods sold Total fixed costs $ 0 EA 0 $ 0 CA 0 Required 3 Required 1 Required 2 Prepare operating income statements for both years based on variable costing. Beginning finished-goods inventory Cost of goods available for sale Cost of goods manufactured Cost of goods sold
