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Please explain all the solutions Part IV (12 marks) The Miller Company had the following results for its first two years of operation: Year 2
Please explain all the solutions Part IV (12 marks) The Miller Company had the following results for its first two years of operation: Year 2 $1,200,000 800.000 400,000 300.000 $100.000 Year 1 $1,200,000 800,000 400,000 Sales Cost of goods sold Gross margin Selling and administrative expense Operating inoome 300.000 $100,000 In Year 1, the company produced and sold 40,000 units of its only product; in Year 2, the company again sold 40,000 units, but increased production to 50,000 units. The company's variable production cost is $5 per unit, and its fixed manufacturing overhead cost is $600,000 a year. Fixed manufacturing overhead costs are applied to the product on the basis of cach year's unit production (i.e., a new fixed overhead rate is computed each year). Variable selling and administrative expenses are $2 per unit sold. Required: a) Compute the unit product cost for each year under absorption costing and under variable costing. b) Prepare an income statement under absorption costing and variable costing formats for Year 2. c) Reconcile the variable costing and absorption costing income figures for each year. d) Explain why the operating income for Year 2 under absorption costing was different than the operating income for Year 1, although the same number of units were sold in each year
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