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Berk Company began operations on January 5, 2018. Cost and sales information for its first two calendar years of operations are summarized below. Manufacturing costs Direct materials.. Direct labor..... Factory overhead costs Variable overhead ..... Fixed overhead (per year).. Nonmanufacturing costs $80 per unit $120 per unit $30 per unit $14,000,000 Variable selling and administrative....... $10 per unit Fixed selling and administrative ......... $ 8,000,000 Production and sales data Units produced, 2018. Units sold, 2018...... ****** Units in ending inventory, 2018... Units produced, 2019 Units sold, 2019..... Units in ending inventory, 2019... Sales price per unit... 200,000 units 140,000 units 60,000 units 80,000 units 140,000 units O units $600 per unit Required 1. Prepare an income statement for the company for 2018 under absorption costing. 2. Prepare an income statement for the company for 2018 under variable costing. 3. Explain the source(s) of the difference in reported income for 2018 under the two costing methods.

Berk Company began operations on January 5, 2018. Cost and sales information for its first two calendar years of operations are summarized below. Manufacturing costs Direct materials.. Direct labor..... Factory overhead costs Variable overhead ..... Fixed overhead (per year).. Nonmanufacturing costs $80 per unit $120 per unit $30 per unit $14,000,000 Variable selling and administrative....... $10 per unit Fixed selling and administrative ......... $ 8,000,000 Production and sales data Units produced, 2018. Units sold, 2018...... ****** Units in ending inventory, 2018... Units produced, 2019 Units sold, 2019..... Units in ending inventory, 2019... Sales price per unit... 200,000 units 140,000 units 60,000 units 80,000 units 140,000 units O units $600 per unit Required 1. Prepare an income statement for the company for 2018 under absorption costing. 2. Prepare an income statement for the company for 2018 under variable costing. 3. Explain the source(s) of the difference in reported income for 2018 under the two costing methods.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Berk Company began operations on January 5, 2018. Cost and sales information for its first two calendar years of operations are summarized below. Manufacturing costs Direct materials.. Direct labor..... Factory overhead costs Variable overhead... Fixed overhead (per year)... Nonmanufacturing costs Variable selling and administrative...... Fixed selling and administrative... $80 per unit $120 per unit $30 per unit $14,000,000 $10 per unit $ 8,000,000 Production and sales data Units produced, 2018. Units sold, 2018...... Units in ending inventory, 2018...... Units produced, 2019. Units sold, 2019..... Units in ending inventory, 2019... Sales price per unit... 200,000 units 140,000 units 60,000 units 80,000 units 140,000 units 0 units $600 per unit Required 1. Prepare an income statement for the company for 2018 under absorption costing. 2. Prepare an income statement for the company for 2018 under variable costing. 3. Explain the source (s) of the difference in reported income for 2018 under the two costing methods. 4. Prepare an income statement for the company for 2019 under absorption costing. 5. Prepare an income statement for the company for 2019 under variable costing. 6. Prepare a schedule to convert variable costing income to absorption costing income for each of the years 2018 and 2019.
Transcribed Image Text:Berk Company began operations on January 5, 2018. Cost and sales information for its first two calendar years of operations are summarized below. Manufacturing costs Direct materials.. Direct labor..... Factory overhead costs Variable overhead... Fixed overhead (per year)... Nonmanufacturing costs Variable selling and administrative...... Fixed selling and administrative... $80 per unit $120 per unit $30 per unit $14,000,000 $10 per unit $ 8,000,000 Production and sales data Units produced, 2018. Units sold, 2018...... Units in ending inventory, 2018...... Units produced, 2019. Units sold, 2019..... Units in ending inventory, 2019... Sales price per unit... 200,000 units 140,000 units 60,000 units 80,000 units 140,000 units 0 units $600 per unit Required 1. Prepare an income statement for the company for 2018 under absorption costing. 2. Prepare an income statement for the company for 2018 under variable costing. 3. Explain the source (s) of the difference in reported income for 2018 under the two costing methods. 4. Prepare an income statement for the company for 2019 under absorption costing. 5. Prepare an income statement for the company for 2019 under variable costing. 6. Prepare a schedule to convert variable costing income to absorption costing income for each of the years 2018 and 2019.
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