Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of

operations:

Variable costs per unit:

Manufacturing:

Direct materials $$25$

Direct labor $ $$16$

Variable manufacturing overhead $$3$

Variable selling and administrative $$2$

Fixed costs per year:

Fixed manufacturing overhead $$400,000$

Fixed selling and administrative expenses $$90,000$

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 $$55$ per unit.

Required:

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 $2.$

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 $2.$

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

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