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Security Technology Incorporated (STI) is a manufacturer of an electronic control system used in the manufacture of certain special- duty auto transmissions used primarily for police and military applications. The part sells for $61 per unit and STI had sales of 24,300 units in the current year, 2021. STI had no inventory on hand at the beginning of 2021 and is projecting sales of 26,900 units in 2022. STI is planning the same production level for 2022 as in 2021, 25,600 units. The variable manufacturing costs for STI are $22, and the variable selling costs are only $0.40 per unit. The fixed manufacturing costs are $128,000 per year, and the fixed selling costs are $560 per year. Required: 1. Prepare an income statement for each year using full costing. 2. Prepare an income statement for each year using variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable costing methods.

Security Technology Incorporated (STI) is a manufacturer of an electronic control system used in the manufacture of certain special- duty auto transmissions used primarily for police and military applications. The part sells for $61 per unit and STI had sales of 24,300 units in the current year, 2021. STI had no inventory on hand at the beginning of 2021 and is projecting sales of 26,900 units in 2022. STI is planning the same production level for 2022 as in 2021, 25,600 units. The variable manufacturing costs for STI are $22, and the variable selling costs are only $0.40 per unit. The fixed manufacturing costs are $128,000 per year, and the fixed selling costs are $560 per year. Required: 1. Prepare an income statement for each year using full costing. 2. Prepare an income statement for each year using variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable costing methods.

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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**Transcription for Educational Website** **Security Technology Incorporated (STI) Overview:** STI is a manufacturer of electronic control systems used in the production of special-duty auto transmissions, primarily for police and military use. The components sell for $61 per unit. In 2021, STI sold 24,300 units. The company began 2021 with no inventory and projects sales of 26,900 units in 2022. The production level is set at 25,600 units for both 2021 and 2022. - **Variable Manufacturing Costs:** $22 per unit - **Variable Selling Costs:** $0.40 per unit - **Fixed Manufacturing Costs:** $128,000 per year - **Fixed Selling Costs:** $560 per year **Requirements:** 1. Prepare an income statement for each year using full costing. 2. Prepare an income statement for each year using variable costing. 3. Prepare a reconciliation of the difference each year in operating income from using full and variable costing methods. **Instructions:** Complete the tasks by entering answers in the provided tabs. **Reconciliation Task:** Prepare a reconciliation of the difference each year in operating income from the full and variable costing methods. - Use a minus sign for negative amounts. - Do not round intermediate calculations. - Round "Fixed overhead rate" answers to two decimal places. - Round other final answers to the nearest whole dollar amount. **Table Summary:** **SECURITY TECHNOLOGY INCORPORATED** _Reconciling Difference in Operating Income Between Full and Variable Costing_ - **2021:** - Change in Inventory in Units: 745,420 - Multiply Times Fixed Overhead Rate: $3,400.00 - Difference in Operating Income: $2,534,428,000 - **2022:** - Change in Inventory in Units: 935,980 - Multiply Times Fixed Overhead Rate: $(1,600.00) - Difference in Operating Income: $(1,497,568,000)
Transcribed Image Text:**Transcription for Educational Website** **Security Technology Incorporated (STI) Overview:** STI is a manufacturer of electronic control systems used in the production of special-duty auto transmissions, primarily for police and military use. The components sell for $61 per unit. In 2021, STI sold 24,300 units. The company began 2021 with no inventory and projects sales of 26,900 units in 2022. The production level is set at 25,600 units for both 2021 and 2022. - **Variable Manufacturing Costs:** $22 per unit - **Variable Selling Costs:** $0.40 per unit - **Fixed Manufacturing Costs:** $128,000 per year - **Fixed Selling Costs:** $560 per year **Requirements:** 1. Prepare an income statement for each year using full costing. 2. Prepare an income statement for each year using variable costing. 3. Prepare a reconciliation of the difference each year in operating income from using full and variable costing methods. **Instructions:** Complete the tasks by entering answers in the provided tabs. **Reconciliation Task:** Prepare a reconciliation of the difference each year in operating income from the full and variable costing methods. - Use a minus sign for negative amounts. - Do not round intermediate calculations. - Round "Fixed overhead rate" answers to two decimal places. - Round other final answers to the nearest whole dollar amount. **Table Summary:** **SECURITY TECHNOLOGY INCORPORATED** _Reconciling Difference in Operating Income Between Full and Variable Costing_ - **2021:** - Change in Inventory in Units: 745,420 - Multiply Times Fixed Overhead Rate: $3,400.00 - Difference in Operating Income: $2,534,428,000 - **2022:** - Change in Inventory in Units: 935,980 - Multiply Times Fixed Overhead Rate: $(1,600.00) - Difference in Operating Income: $(1,497,568,000)
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