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Variable Costing Income Statement; Reconciliation (L02, 1031 During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000

Variable Costing Income Statement; Reconciliation (L02, 1031 During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000

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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PROBLEM 8-11 Variable Costing Income Statement; Reconciliation ⒸL03) LO2, During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Units produced Units sold Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Year 1 25,000 20,000 Year 1 $ 1,000,000 400,000 60,000 460,000 Year 2 25,000 30,000 Year 2 $1,500,000 600,000 90,000 690,000
Transcribed Image Text:PROBLEM 8-11 Variable Costing Income Statement; Reconciliation ⒸL03) LO2, During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Units produced Units sold Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Year 1 25,000 20,000 Year 1 $ 1,000,000 400,000 60,000 460,000 Year 2 25,000 30,000 Year 2 $1,500,000 600,000 90,000 690,000
Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) The company's $20 unit product cost is computed as follows: Direct materials. Direct labour Variable manufacturing overhead Unit product cost Required: 1. Prepare an absorption costing income statement for each year. The company's $20 unit product cost is computed as follows: Direct materials Direct labour Variable manufacturing overhead Unit product cost Year 1 $1,000,000 400,000 60,000 460,000 540,000 350,000 250,000 600,000 $ (60,000) Required: 1. Prepare an absorption costing income statement for each year. 2. Reconcile the absorption costing and variable costing operating income figures for each year. Year 2 $1,500,000 600,000 90,000 690,000 810,000 350,000 250,000 600,000 $210,000 $8 10 2 $20 $8 10 2 $20 Page 330
Transcribed Image Text:Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) The company's $20 unit product cost is computed as follows: Direct materials. Direct labour Variable manufacturing overhead Unit product cost Required: 1. Prepare an absorption costing income statement for each year. The company's $20 unit product cost is computed as follows: Direct materials Direct labour Variable manufacturing overhead Unit product cost Year 1 $1,000,000 400,000 60,000 460,000 540,000 350,000 250,000 600,000 $ (60,000) Required: 1. Prepare an absorption costing income statement for each year. 2. Reconcile the absorption costing and variable costing operating income figures for each year. Year 2 $1,500,000 600,000 90,000 690,000 810,000 350,000 250,000 600,000 $210,000 $8 10 2 $20 $8 10 2 $20 Page 330
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