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Required: 1. Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement: • Cost of goods sold • Fixed cost (expensed as a period expense) 2. What was Lehighton's total operating income across both years under absorption costing and under variable costing? 3. What was the total sales revenue across both years under absorption costing and under variable costing? 4. What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? 5. Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3): (a) under absorption costing and (b) under variable costing.

Required: 1. Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement: • Cost of goods sold • Fixed cost (expensed as a period expense) 2. What was Lehighton's total operating income across both years under absorption costing and under variable costing? 3. What was the total sales revenue across both years under absorption costing and under variable costing? 4. What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? 5. Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3): (a) under absorption costing and (b) under variable costing.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $25 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Lehighton's first two years of operation is as follows: Year 1 Year 2 Sales (in units) Production (in units) Production costs: Variable manufacturing costs Fixed manufacturing overhead Selling and administrative costS: Variable 2,500 3,100 2,500 1,900 $15,190 18,290 $ 9,310 18,290 10,000 9,000 10,000 9,000 Fixed Selected information from Lehighton's year-end balance sheets for its first two years of operation is as follows: LEHIGHTON CHALK COMPANY Selected Balance Sheet Information Based on absorption costing Finished-goods inventory Retained earnings End of Year 1 End of Year 2 $ 6,480 11,000 17,720 Based on variable costing Finished-goods inventory Retained earnings End of Year 1 End of Year 2 $ 2,940 7,460 17,720 Required: 1. Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement: • Cost of goods sold • Fixed cost (expensed as a period expense) 2. What was Lehighton's total operating income across both years under absorption costing and under variable costing? 3. What was the total sales revenue across both years under absorption costing and under variable costing? 4. What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? 5. Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3): (a) under absorption costing and (b) under variable costing.
Transcribed Image Text:Lehighton Chalk Company manufactures sidewalk chalk, which it sells online by the box at $25 per unit. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-process inventory. The actual application rate for manufacturing overhead is computed each year; actual manufacturing overhead is divided by actual production (in units) to compute the application rate. Information for Lehighton's first two years of operation is as follows: Year 1 Year 2 Sales (in units) Production (in units) Production costs: Variable manufacturing costs Fixed manufacturing overhead Selling and administrative costS: Variable 2,500 3,100 2,500 1,900 $15,190 18,290 $ 9,310 18,290 10,000 9,000 10,000 9,000 Fixed Selected information from Lehighton's year-end balance sheets for its first two years of operation is as follows: LEHIGHTON CHALK COMPANY Selected Balance Sheet Information Based on absorption costing Finished-goods inventory Retained earnings End of Year 1 End of Year 2 $ 6,480 11,000 17,720 Based on variable costing Finished-goods inventory Retained earnings End of Year 1 End of Year 2 $ 2,940 7,460 17,720 Required: 1. Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement: • Cost of goods sold • Fixed cost (expensed as a period expense) 2. What was Lehighton's total operating income across both years under absorption costing and under variable costing? 3. What was the total sales revenue across both years under absorption costing and under variable costing? 4. What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? 5. Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3): (a) under absorption costing and (b) under variable costing.
Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement: • Cost of goods sold • Fixed cost (expensed as a period expense) Show lessa Year 1 Year 2 Subtotal Total Difference in operating income Required 1 Required 2 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was Lehighton's total operating income across both years under absorption costing and under variable costing? Total Operating Income Absorption costing Variable costing < Required 1 Required 3 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was the total sales revenue across both years under absorption costing and under variable costing? Total Sales Revenue Absorption costing Variable costing < Required 2 Required 4 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? Costs Expensed Absorption costing Variable costing < Required 3 Required 5 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3): (a) under absorption costing and (b) under variable costing. Amount Absorption costing Variable costing < Required 4 Required 6 >
Transcribed Image Text:Reconcile Lehighton's operating income reported under absorption and variable costing, during each year, by comparing the following two amounts on each income statement: • Cost of goods sold • Fixed cost (expensed as a period expense) Show lessa Year 1 Year 2 Subtotal Total Difference in operating income Required 1 Required 2 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was Lehighton's total operating income across both years under absorption costing and under variable costing? Total Operating Income Absorption costing Variable costing < Required 1 Required 3 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was the total sales revenue across both years under absorption costing and under variable costing? Total Sales Revenue Absorption costing Variable costing < Required 2 Required 4 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 What was the total of all costs expensed on the operating income statements across both years under absorption costing and under variable costing? Costs Expensed Absorption costing Variable costing < Required 3 Required 5 > Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Subtract the total costs expensed across both years (requirement 4) from the total sales revenue across both years (requirement 3): (a) under absorption costing and (b) under variable costing. Amount Absorption costing Variable costing < Required 4 Required 6 >
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