Kelly Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations: Variable cost per unit: Direct materials $4 11.00 Fixed costs per year: Direct labor Fixed manufacturing overhead Fixed selling and administrative expenses $ 450,500 $ 472,500 $ 186,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Kelly produced 53,000 units and sold 42,250 units. During its second year of operations, it produced 53,000 units and sold 63,750 units. The selling price of the company's product is $44 per unit. Required: 1. Assume the company uses super-variable costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 2. Assume the company uses a variable costing system that assigns $8.50 of direct labor cost to each unit produced: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1 and 2. Complete this question by entering your answers in the tabs below. Reg 1A Req 1B Reg 2A Req 2B Req 3 Compute the unit product cost for Year 1 and Year 2. Assume the company uses super-variable costing. (Round your answers to 2 decimal places.) Unit Product Cost Year 1 Year 2

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Kelly Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

### Costs:
- **Variable cost per unit:**
  - Direct materials: $11.00

- **Fixed costs per year:**
  - Direct labor: $450,500
  - Fixed manufacturing overhead: $472,500
  - Fixed selling and administrative expenses: $186,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Kelly produced 53,000 units and sold 42,250 units. During its second year of operations, it produced 53,000 units and sold 63,750 units. The selling price of the company’s product is $44 per unit.

### Required:
1. Assume the company uses super-variable costing:
   - a. Compute the unit product cost for Year 1 and Year 2.
   - b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses a variable costing system that assigns $8.50 of direct labor cost to each unit produced:
   - a. Compute the unit product cost for Year 1 and Year 2.
   - b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1 and 2.

### Instructions:
Complete this question by entering your answers in the tabs below.

**Req 1A:**  
Compute the unit product cost for Year 1 and Year 2. Assume the company uses super-variable costing. (Round your answers to 2 decimal places.)

#### Unit Product Cost
- Year 1: _______
- Year 2: _______
Transcribed Image Text:Kelly Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: ### Costs: - **Variable cost per unit:** - Direct materials: $11.00 - **Fixed costs per year:** - Direct labor: $450,500 - Fixed manufacturing overhead: $472,500 - Fixed selling and administrative expenses: $186,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Kelly produced 53,000 units and sold 42,250 units. During its second year of operations, it produced 53,000 units and sold 63,750 units. The selling price of the company’s product is $44 per unit. ### Required: 1. Assume the company uses super-variable costing: - a. Compute the unit product cost for Year 1 and Year 2. - b. Prepare an income statement for Year 1 and Year 2. 2. Assume the company uses a variable costing system that assigns $8.50 of direct labor cost to each unit produced: - a. Compute the unit product cost for Year 1 and Year 2. - b. Prepare an income statement for Year 1 and Year 2. 3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1 and 2. ### Instructions: Complete this question by entering your answers in the tabs below. **Req 1A:** Compute the unit product cost for Year 1 and Year 2. Assume the company uses super-variable costing. (Round your answers to 2 decimal places.) #### Unit Product Cost - Year 1: _______ - Year 2: _______
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