Question 6-9

1. Assume the company uses variable costing:

1. Compute the unit product cost for Year 1 and Year 2.
2. Prepare an income statement for Year 1 and Year 2.

in its anna EXERCISE 6-8 Deducing change report to shareholders. According to a CVP analysis prepared for management, the company's break-even point is $115 million in sales. Parker Products Inc, a manufacturer, reported $123 million Required: Assuming that the CVP analysis is correct, is it likely that the company's inventory level increased decreased, or remained unchanged during the year? Explain. EXERCISE 6-9 Variable and Absorption Costing Unit Product Costs and Income Statements Walsh Company manufactures and sells one product. The following information pertains to each of the [LO6-I, LO62, LO63] company's first two years of operations: $25 $15 Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $5 $2 $250,000 $80,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company's product is $60 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 2. Assume the company uses absorption costing: a. Compute the unit product cost for Year 1 and Year 2. for 2 3. Explain the difference between variable costing and absorption costing net operating income in Your 1. Also, explain why the two net operating income figures differ in Year 2. EXERCISE 6-10 Companywide and Segment Break-Even Analysis [LO6-5] Crossfire Company segments its business into two regions-East and West. The company prepared the contribution format segmented income statement shown below: Sales East West Total Company $900,000 675,000 Variable expenses $600,000 480.000 $300,000 195,000 Contribution margin