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20190 3,800 3,320 Budgeted production and sales Data (aLL Direct materials and labor Fixed u f c t ur ing overhead Selling and Prod u c t i $770,000 120, 000 120, 000 52s, ooo 645,000 201 e 4,200 4, 480 s, 000 2, 095 1,200 4,400 i, 080 1,995 1,200 Req 1 Req 2A Req 23 $875, ooo Top management at Hancock explained 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 fixed 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 firm was able to reduce in 2019 by further reducing the level Of production. In both years. Hancock's actual production was less than the budgeted level so that the overhead rate for fixed overhead, calculated from budgeted production levels, was too low, and a 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 IS and reviewed briefly below). The production volume variance for 2018 was determined from tine fixed overhead rate of $175 per unit budgeted units). Because the actual production level was 520 units short Of the budgeted level in 2018 (5,000 4,480), the amount Of the production volume variance in 2018 was 520 $175 = $91,000. The production volume variance iS underapplied because the actual 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 iS shown using variable costing, prepare an income Statement for each period. Variable Costing Income S Cost of goods sold inventory Cmt of goods produced Cost Of goods available for sale Less: Ending inventory Cost of goods sold Add; Variable selling administrative Contributim margin ess: Fixed manufacturing costs Less: Selling and administrative costs incane 8,799.000 7581.000 below: sales Cost ot goods sold: cost of available Legg ending inventory Cost good* sold: Adjusted COSt Of goods sold Gross margin selling Fixed Ope rat ing 1 Required: $1,100, ooo 6 160 ooo 1,48S 000 220 JOO 8, 799,000 SS, 775,000 OOC I. 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 methods. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req Req 2B using the full costing method, prepare the income statement for 2019. Full Costing Income Statement Cost Of g5CdS SO ld Begin n i ng Cost Of gtcduced Cost Of available sale Less: Eneng inventor,' 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 g Difference in Net Income Between Absoprtion and Variable Costi Clunge in inventory in units Multiply times fixed overhead rate Difference in net income