Question
The Slap Shot Company is located in Toronto, Canada and they manufacture hockey sticks. Ice hockey is a very popular sport during the winter in
The Slap Shot Company is located in Toronto, Canada and they manufacture hockey sticks. Ice hockey is a very popular sport during the winter in Canada.
In 2019, the company produced 25,000 hockey sticks and sold 18,000 hockey sticks. In 2020, the production and sales results were exactly reversed as the company produced 18,000 hockey sticks and sold 25,000 hockey sticks.
The selling price of the hockey stick is $100, the variable manufacturing costs are $40 per unit, variable selling expenses are $8 per unit, fixed manufacturing costs is $540,000 in total, and $200,000 is the total cost for fixed administrative expenses.
Instructions
1) Using the information provided, prepare an income statement for the 2019 year using variable costing.
2) Using the information provided, prepare an income statement for 2019 using absorption costing.
3) Reconcile the difference in Net Income (explain why there is a difference in net income) from operations under the two costing approaches, variable and absorption.
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