Walsh Company manufactures and sells one product. The following information pertains to each of the companys first two years of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$	21
Direct labor	$	16
Variable manufacturing overhead	$	3
Variable selling and administrative	$	2
Fixed costs per year:
Fixed manufacturing overhead	$	240,000
Fixed selling and administrative expenses	$	100,000

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 companys product is $58 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.

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

Req 1A Req 1B Req 2A Req 2B Reg 3 Assume the company uses variable costing. Prepare an income statement for Year 1 and Year 2. Walsh Company Income Statement Year 1 Year 2 Sales $ 2,320,000 $ 2,900,000 Variable expenses: 0 0 2,320,000 2,900,000 0 0 Net operating income (loss) $ 2,320,000 $ 2,900,000 Req 1A Req 1B Reg 2A Reg 2B Req Reconcile the difference between variable costing and absorption costing net operating income in Year 1. (Enter any losse deductions as a negative value.) Year 1 Year 2 $ 300,000 $ 460,000 Variable costing net operating income (loss) Add: Fixed manufacturing overhead cost released from inventory under absorption costing X 48,000 (48,000) Absorption costing net operating income (loss) $ 348,000 $ 412,000