Year 1 Year 2 Sales ( 61 per unit) $1,037,000 $1,647,000 Cost of Goods Sold ( $37 per unit) 629,000 999,000 Gross Margin 408,000 648,000 Selling Admin Expenses 289,000 319,000 Net operating income 119,000 329,000 $3 per unit variable $238,000 fixed each year The companys $37 unit product cost is computed as follows Direct Materials $9 Direct labor $11 Variable Manufacturing overhead Fixed manufacturing overhead($308,000 22,000units) 3 14 Absorbtion costing unit product cost 37 Forty percent of fixed manufacturing overhead consists of wages and salaries the remainder consists of depreciation charges on production equipment and buildings Year 1 Year 2 Units Produced $22,000 $22,000 Units Sold 17,000 27,000 1 Prepare a variable costing contribution format income statement for each year 2 Reconcile the absorption costing and the variable costing net operating income figures for each year (Losses and deductions should be indicated with a minus sign )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 27, 2024

Year 1 Year 2 Sales (@61 per unit) $1,037,000 $1,647,000 Cost of Goods Sold (@$37 per unit) 629,000 999,000 Gross Margin 408,000 648,000 Selling &

	Year 1	Year 2
Sales (@61 per unit)	$1,037,000	$1,647,000
Cost of Goods Sold (@$37 per unit)	629,000	999,000

Gross Margin	408,000	648,000
Selling & Admin. Expenses	289,000	319,000
Net operating income	119,000	329,000

$3 per unit variable; $238,000 fixed each year.

The companys $37 unit product cost is computed as follows

Direct Materials	$9
Direct labor	$11
Variable Manufacturing overhead Fixed manufacturing overhead($308,000/22,000units)	3	14

Absorbtion costing unit product cost	37

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.

	Year 1	Year 2
Units Produced	$22,000	$22,000
Units Sold	17,000	27,000

1.Prepare a variable costing contribution format income statement for each year.

2.	Reconcile the absorption costing and the variable costing net operating income figures for each year. (Losses and deductions should be indicated with a minus sign.)