Wu Equipment Company manufactures and distributes industrial air compressors. The following data are available for the year ended December 31, 2012. The company had no beginning inventory. In 2012, it produced 1,500 units but sold only 1,200 units. The unit selling price was $4,500. Costs and expenses were as follows:
Variable costs per unit
Direct materials ...................................................... $ 800
Direct labour ......................................................... 1,500
Variable manufacturing overhead ................................. 300
Variable selling and administrative expenses .................... 70
Annual fixed costs and expenses
Manufacturing overhead ..........................................$1,200,000
Selling and administrative expenses .................................100,000
Instructions
(a) Calculate the manufacturing cost of one unit of product using variable costing.
(b) Prepare a 2012 income statement for Wu Company using variable costing.
(c) Calculate the manufacturing cost of one unit of product using throughput costing.
(d) Prepare a 2012 income statement for Wu Company using throughput costing.
(e) Reconcile the difference between variable-costing and throughput-costing net income.