MANAGERIAL ACCOUNTING-Absorption and Variable

At the start of 2017 R&S Company had an inventory of 1,000 screwdrivers. During the year ended December 31, 2017, R&S Company produced 10,000 screwdrivers and sold 8,000 screwdrivers at an average selling price of $65 per screwdriver. During that year for every screwdriver that they sold, they incurred variable selling expenses of $5 per screwdriver sold and, in addition, variable administrative expenses of $4 for every screwdriver that they sold. The annual fixed selling expenses and fixed administrative expenses were $70,000 and $30,000 respectively. The manufacturing costs for 2017 were as follows: Direct material cost per screwdriver $ 11 Direct labour cost per screwdriver $ 6 Variable manufacturing overhead cost per screwdriver $ Fixed manufacturing overhead costs per year $ 100,000 Selected cost and operating data relating to the prior year (December 31, 2016) are as follows: Variable manufacturing costs per screwdriver $ 19 Fixed manufacturing overhead cost per screwdriver $ 9 REQUIRED: 1. Assume the company uses absorption costing with FIFO: (a) Compute the unit manufacturing cost of one screwdriver for each year. (b) Prepare an income statement for the year ended December 31, 2017 2. Assume the company uses variable (direct) costing with FIFO: (a) Compute the unit manufacturing cost of one screwdriver for each year. (b) Prepare an income statement for the year ended December 31, 2017 3. Reconcile the above two operating incomes