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Wildhorse Company produces plastic that is used for injection-moulding applications such as gears for small motors. In 2022, the first year of operations, Wildhorse Company
Wildhorse Company produces plastic that is used for injection-moulding applications such as gears for small motors. In 2022, the first year of operations, Wildhorse Company produced 4,900 tonnes of plastic and sold 3,528 tonnes. In 2023, the production and sales results were exactly reversed. In each year, the selling price per tonne was $2,200; variable manufacturing costs were 17% of the sales price for the units produced; variable selling expenses were 9% of the selling price of the units sold; fixed manufacturing costs were $3,528,000; and fixed administrative expenses were $612,500. (a) Prepare comparative income statements for each year using variable costing. (Use the format from Illustration 8.5.) WILDHORSE COMPANY Income Statement-Variable Costing For the Years Ended December 31 2022 2023 Number of units manufactured Number of units sold $ $ ZU24 Number of units manufactured Number of units sold $ $ $ $ Prepare comparative income statements for each year using absorption costing. (Use the format from Illustration 8.4.) BLUE SPRUCECOMPANY Income Statement-Absorption Costing For the Years Ended December 31 2022 2023 Number of units produced 4300 3225 Number of units sold 3225 4300 Sales $ 6450000 $ 8600000 Less : Cost of goods sold Inventory, beginning 0 Add V: Costs of goods manufactured 1548000 Cost of goods available for sale 1548000 Less : Inventory, ending 387000 0 Cost of goods sold Gross margin Less V : Selling and administrative costs Net income $ $ c. Reconcile the differences in the income from operations each year under the two costing approaches. (c) Reconciliation, 2016- Variable costing net income- Plus: Fixed MOH deferred in ending inventory Absorption costing net income Reconciliation, 2017 Variable costing net income- Less: Fixed MOH released from beginning Absorption costing net income
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