Mark Hancock Inc. manufactures a specialized surgical Instrument called the HAN 20. The firm has grown rapidly in recent years because of the product's low price and high quality. However, sales have declined this year primarily due to increased competition and a decrease in the surgical procedures for which the HAN 20 is used. The firm is concerned about the decline in sales and has hired a consultant to analyze the firm's profitability. The consultant was provided the following information 2018 4,200 4,10 5,000 880 2019 3,800 3,320 4,000 1,080 Sales (units) Production Budgeted production and sales Beginning inventory Data per unit (all variable) Price Direct materials and labor Selling costs Fixed costs Manufacturing overhead Selling and administrative $ 2,095 $ 1,995 1,200 1,200 125 $875,000 $770,000 120,000 120,000 Top management at Hancock exploined to the consultant that a difficult business environment for the firm in 2018 and 2019 had caused the firm to reduce its price and production levels and reduce its fired manufacturing costs in response to the decline in sales Even with the price reduction, there was a decline in sales in both years. This led to an increase in inventory in 2018, which the fim was able to reduce in 2015 by the reducing the level of production in both years, Hancocks actual production was less than the budgeted level so that the overhead for fred overhead calculated from budgeted production levels was too low and production volume variance was calculated to adjust cost of goods sold for the underapplied fixed overhead the calculation of the production volume variance is explained fully in Chapter 15 and reviewed by below The production volume variance for 2018 was determined from the red overhead role of Speront ($875.000/5.000 budgeted units) Because the actual production level was 520 Short of the budgeted level in OR (5000 - 4480L the amount of the production volume variance in 2018 was 520 $175 $9.000. The productor volume once underapplied because the actual production levelsess than budgeted and the production volume ances therefore added back to cost of goods sold to determine the amount of cost of goods sold in the full costing income to the full costo come statement for 2018 is shown below E . Type here to search FVO F11 FY FS FB FO F7 F5 F2 F1 F4 1 F3 40 2 - A * $ @ #m % 5 & 7 ( 9 8 0 4 6 1 2 O Y U T E R Q W units). Because the actual production level was 520 units short of the budgeted level in 2018 (5,000 - 4480, the amount of production volume variance in 2018 was 520 $175 - $91,000. The production volume variance is underapplied because the production level is less than budgeted, and the production volume variance is therefore added back to cost of goods sold to determine the amount of cost of goods sold in the full costing income statement. The full costng income statement for 2018 i below 8,799,000 $1,100,000 6,160,000 $7,260,80 1,485,000 Sales Cost of goods sold: Beginning inventory Cost of goods produced Cost of goods available for sale Less ending inventory Cost of goods sold: Plus unfavorable production volume variance Adjusted cost of goods sold Gross margin Less selling and administrative costs Variable Fixed Operating income $5,775,000 91,000 $5,866,000 $2,933,000 $ 525,000 120,000 645,000 $2,288,00 Required: 1. Using the full costing method prepare the income statement for 2019 2-a. Using variable costing prepare an income statement for each period. 2 b. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable-costing method Complete this question by entering your answers in the tabs below. 1 Reg 2 Reg 20 Type here to search gi e F10 F2 FB F9 F1 F3 F4 F5 F6 F7 Q 46 g X * @ A # $ % & a Using the full costing method, prepare the income statement for 2019 MARK HANCOCK, INC. Full Costing Income Statement 2019 $ 7,581,000 Sales Cost of goods sold Beginning inventory Cost of goods produced $ 1,485,000 4,565,000 6,050 000 Cost of goods available for sale Less Ending inventory Cost of goods sold Adjust Production volume variance Adjusted cost of goods sold Gross margin Less Selling and administrative costs Variable Foced Operating income Reg 2A > pe here to search el e F6 F7 F3 F9 F F5 FB F1 F2 F4 K 3 X 0 # A $ % & 7 3 4 6 8 Using variable costing, prepare an income statement for each period. MARK HANCOCK, INC., Variable Costing Income Statement 2018 2019 Sales Cost of goods sold Beginning inventory Cost of goods produced Cost of goods available for sale Less Ending inventory Cost of goods sold Add Variable selling and administrative Contribution margin Less. Fored manufacturing costs Less Seling and administrative costs Variable Fixed manufacturing costs pe here to search RI e F" FB F7 F9 F5 F6 F2 F1 F3 F4 Q + 46 A # & $ 4 % 5 1 8 6 3 7 2 Using the full costing method, prepare the income statement for 2019 -a. Using variable costing, prepare an income statement for each period. 2-5. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable-cost Complete this question by entering your answers in the tabs below. Reg 1 Req2A Reg 28 Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable-costing methods. (Negative amounts should be indicated by a minus sign.) MARK HANCOCK, INC. Reconciling Difference in Net Income Between Absoprtion and Variable Costing 2018 2019 Change in inventory in units Multiply times foed overhead rate Difference in net income $ OS 0 pe here to search F7 F8 F9 F F5 F6 F4 F3 F1 N 3 a . 40 E . Type here to search FVO F11 FY FS FB FO F7 F5 F2 F1 F4 1 F3 40 2 - A * $ @ #m % 5 & 7 ( 9 8 0 4 6 1 2 O Y U T E R Q W units). Because the actual production level was 520 units short of the budgeted level in 2018 (5,000 - 4480, the amount of production volume variance in 2018 was 520 $175 - $91,000. The production volume variance is underapplied because the production level is less than budgeted, and the production volume variance is therefore added back to cost of goods sold to determine the amount of cost of goods sold in the full costing income statement. The full costng income statement for 2018 i below 8,799,000 $1,100,000 6,160,000 $7,260,80 1,485,000 Sales Cost of goods sold: Beginning inventory Cost of goods produced Cost of goods available for sale Less ending inventory Cost of goods sold: Plus unfavorable production volume variance Adjusted cost of goods sold Gross margin Less selling and administrative costs Variable Fixed Operating income $5,775,000 91,000 $5,866,000 $2,933,000 $ 525,000 120,000 645,000 $2,288,00 Required: 1. Using the full costing method prepare the income statement for 2019 2-a. Using variable costing prepare an income statement for each period. 2 b. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable-costing method Complete this question by entering your answers in the tabs below. 1 Reg 2 Reg 20 Type here to search gi e F10 F2 FB F9 F1 F3 F4 F5 F6 F7 Q 46 g X * @ A # $ % & a Using the full costing method, prepare the income statement for 2019 MARK HANCOCK, INC. Full Costing Income Statement 2019 $ 7,581,000 Sales Cost of goods sold Beginning inventory Cost of goods produced $ 1,485,000 4,565,000 6,050 000 Cost of goods available for sale Less Ending inventory Cost of goods sold Adjust Production volume variance Adjusted cost of goods sold Gross margin Less Selling and administrative costs Variable Foced Operating income Reg 2A > pe here to search el e F6 F7 F3 F9 F F5 FB F1 F2 F4 K 3 X 0 # A $ % & 7 3 4 6 8 Using variable costing, prepare an income statement for each period. MARK HANCOCK, INC., Variable Costing Income Statement 2018 2019 Sales Cost of goods sold Beginning inventory Cost of goods produced Cost of goods available for sale Less Ending inventory Cost of goods sold Add Variable selling and administrative Contribution margin Less. Fored manufacturing costs Less Seling and administrative costs Variable Fixed manufacturing costs pe here to search RI e F" FB F7 F9 F5 F6 F2 F1 F3 F4 Q + 46 A # & $ 4 % 5 1 8 6 3 7 2 Using the full costing method, prepare the income statement for 2019 -a. Using variable costing, prepare an income statement for each period. 2-5. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable-cost Complete this question by entering your answers in the tabs below. Reg 1 Req2A Reg 28 Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable-costing methods. (Negative amounts should be indicated by a minus sign.) MARK HANCOCK, INC. Reconciling Difference in Net Income Between Absoprtion and Variable Costing 2018 2019 Change in inventory in units Multiply times foed overhead rate Difference in net income $ OS 0 pe here to search F7 F8 F9 F F5 F6 F4 F3 F1 N 3 a . 40