Walton Manufacturing pays its production managers a bonus based on the company's profitability. During the two most recent years, the company maintained the same cost structure to manufacture its products. Units Produced 4,000 6,000 Year Production and Sales Year 2 Year 3 Cost Data Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed Variable selling and administrative expenses Fixed selling and administrative expenses Units Sold 4,000 4,000 $ 13.80 per unit $ 22.80 per unit $ 11.00 per unit $ 102,600 $ 7.20 per unit sold $ 57,000 (Assume that selling and administrative expenses are associated with goods sold.) Waiton sells its products for $109.70 per unit. Required a. Prepare income statements based on absorption costing for Year 2 and Year 3. b. Since Walton sold the same number of units in Year 2 and Year 3, why did net income increase in Year 3. d. Determine the costs of ending inventory for Year 3. e. Prepare income statements based on variable costing for Year 2 and Year 3.
Walton Manufacturing pays its production managers a bonus based on the company's profitability. During the two most recent years, the company maintained the same cost structure to manufacture its products. Units Produced 4,000 6,000 Year Production and Sales Year 2 Year 3 Cost Data Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed Variable selling and administrative expenses Fixed selling and administrative expenses Units Sold 4,000 4,000 $ 13.80 per unit $ 22.80 per unit $ 11.00 per unit $ 102,600 $ 7.20 per unit sold $ 57,000 (Assume that selling and administrative expenses are associated with goods sold.) Waiton sells its products for $109.70 per unit. Required a. Prepare income statements based on absorption costing for Year 2 and Year 3. b. Since Walton sold the same number of units in Year 2 and Year 3, why did net income increase in Year 3. d. Determine the costs of ending inventory for Year 3. e. Prepare income statements based on variable costing for Year 2 and Year 3.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Walton Manufacturing pays its production managers a bonus based on the company's profitability. During the two most recent years,
the company maintained the same cost structure to manufacture its products.
Units Produced
4,000
6,000
Year
Production and Sales
Year 2
Year 3
Cost Data
Direct materials
Direct labor
Manufacturing overhead-variable
Manufacturing overhead-fixed
Units Sold
4,000
4,000
$13.80 per unit
$22.80 per unit.
$ 11.00 per unit
$ 102,600
Variable selling and administrative
$ 7.20 per unit sold
expenses
Fixed selling and administrative expenses
$ 57,000
(Assume that selling and administrative expenses are associated with goods sold.)
Walton sells its products for $109.70 per unit.
Required
a. Prepare income statements based on absorption costing for Year 2 and Year 3.
b. Since Walton sold the same number of units in Year 2 and Year 3, why did net income increase in Year 3.
d. Determine the costs of ending inventory for Year 3.
e. Prepare income statements based on variable costing for Year 2 and Year 3.
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