Ogilvy Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable cost per unit: Direct materials $ 22 Fixed costs per year: Direct labor $ 990,000 Fixed manufacturing overhead $ 838,000 Fixed selling and administrative expenses $ 244,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Ogilvy produced 66,000 units and sold 66,000 units. During its second year of operations, it produced 66,000 units and sold 63,000 units. In its third year, Ogilvy produced 66,000 units and sold 69,000 units. The selling price of the company’s product is $54 per unit. Required: 2. Assume the company uses a variable costing system that assigns $15 of direct labor cost to each unit produced: A. Prepare an income statement for Year 1, Year 2, and Year 3. 3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.
Ogilvy Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:
| Variable cost per unit: | ||
| Direct materials | $ | 22 |
| Fixed costs per year: | ||
| Direct labor | $ | 990,000 |
| Fixed manufacturing |
$ | 838,000 |
| Fixed selling and administrative expenses | $ | 244,000 |
|
|
The company does not incur any variable
Required:
2. Assume the company uses a variable costing system that assigns $15 of direct labor cost to each unit produced:
A. Prepare an income statement for Year 1, Year 2, and Year 3.
3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.
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