Required information Use the following information to answer questions 42-44 [The following information applies to the questions displayed below.) Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $25 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year, actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Lehighton's first two years of operation is as follows: Year 2 Year 1 2,900 3,300 Sales (in units) Production (in units) Production costat Variable manufacturing costs Fixed manufacturing overhead Selling and administrative costs: Variable Fixed 2,900 2,500 $10,500 17,160 $13,860 17,160 11,600 10,600 11,600 10,600 Selected Information from Lehighton's year-end balance sheets for its first two years of operation is as follows: LEHIGHTON CHALK COMPANY Selected Balance Sheet Information Based on absorption costing End of Year 1 End of Year 2 Finished-goods inventory $ 3,760 $ 0 Retained earnings 17.540 33, 720 Based on variable costing Finished-goods inventory Retained earnings End of Year 1 $ 1,680 15,460 End of Year 2 $ 0 33, 720 CO Prev 1 2 3 of 3 !!! Next > Case 8-42 Comparison of Absorption and Variable Costing; Actual Costing (LO 8-2, 8-3, 8-4) Required: Lehighton Chalk Company had no beginning or ending work-in-process inventories for either year. 1. Prepare operating income statements for both years based on absorption costing. 2. Prepare operating income statements for both years based on variable costing. 3. Prepare a numerical reconciliation of the difference in income reported under the two costing methods used in requirements 1 and 2. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Sales revenue $ 72,500 $ 72,500 Cost of goods sold Rannnina inihartonte nunta nal 8 Prey 1 NS 3 of 3 Next > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare operating income statements for both years based on absorption costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 Year 2 Sales revenue $ 72,500 $ 72,500 Cost of goods sold: Beginning finished-goods inventory 0 $ 3,760 Cost of goods manufactured 31,020 27,650 Cost of goods available for sale $ 31,020 $ 31,410 Ending finished-goods inventory $ (3,760) $ Cost of goods sold $ (27,260) $ (31,410) Gross margin $ 45,240 $ 41,090 Selling and administrative expenses 22,200 22,200 Operating incomo $ 23,040 18,890 Prey 1 2 of 3 Next > Required information Required 1 Required 2 Required 3 Prepare operating income statements for both years based on variable costing. LEHIGHTON CHALK COMPANY Income Statement Year 1 72,500 Year 2 72,500 $ 0 $ IS > > $ $ Sales revenue Cost of goods sold: Beginning finished-goods inventory Cost of goods manufactured Cost of goods available for sale Ending finished-goods inventory Cost of goods sold Variable selling and administrative costs Total variable costs: Contribution margin Fixed costs: Fixed manufacturing costs Fixed selling and administrative expenses Total fixed costs Operating income IS 1,680 10,500 12,180 60,320 11,600 48,720 60,320 12,180 13,860 13,860 $ 60,320 $ 11,600 $ 48,720 X 60,320 $ 12,180 $ $ $ $ 17.160S 17.160 10,600 10,600 $ 27,760 $ 27,760 $ (15,580) $ (15,580) >