Question 1

Hilton Co. manufactures plastic pet toys. At the start of the current year, Hilton had no inventory. During the year, Hilton produced 5,600,000 units and sold 5,000,000 units. The toys sell for $2.25 each. Variable manufacturing costs were $0.85 per unit (consisting of $0.40 for direct materials and $0.45 for conversion). Variable selling, general, and administrative costs were $0.15 per unit. Fixed manufacturing costs were $2,300,000 for the year, and fixed selling, general, and administrative costs were $1,100,000.

Required:

a) Prepare an absorption costing income statement for the current year.

b) Prepare a variable costing income statement for the current year.

c) Reconcile the difference between the variable and absorption costing incomes.

d) Prepare a throughput costing income statement for the current year.