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Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These
Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations: Prior Year Sales Production Production cost -fixed Marketing-variable: Administrative-fixed 1,800 units Current Year 2,200 units 2,000 units 2,000 units Factory-variable (per unit) $ 0.60 $1,000 $ 0.40 $ 0.60 $1,000 $ 0.40 $ 500 $ 500 Required: 1. Prepare an income statement for each year based on full costing. 2. Prepare an income statement for each year based on variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method. Sales Less: Cost of goods sold. Beginning inventory Cost of goods produced Available for sale Less: Ending inventory Cost of goods sold Contribution margin Add: Variable selling and administrative Less: Fixed manufacturing costs Less: Selling and administrative costs Operating income YALE COMPANY Variable Costing Income Statement Prior Year Current Year $ 5,400 $ 6,600 $ 0 $ 0 Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method. (Negative amounts should be indicated by a minus sign. Round your "Fixed overhead rate" answers to 2 decimal places.) YALE COMPANY Reconciling Difference in Operating Income Between Full and Variable Costing Prior Year Current Year Change in inventory in units x fixed overhead rate Difference in operating income $ 0 $ 0
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