Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations: Sales (000s) Production (000s) Production cost Factory-variable (per unit) -fixed (000s) Marketing-variable (per unit) Administrative-fixed (000s) Prior Year 1,800 units 2,000 units $ 0.60 $ 1,000 $ 0.40 $500 Current Year 2,200 units 2,000 units $ 0.60 $ 1,000 $ 0.40 $ 500 Required: 1. Prepare an income statement for each year based on full costing. 2. Prepare an income statement for each year based on variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method.

Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations: Sales (000s) Production (000s) Production cost Factory-variable (per unit) -fixed (000s) Marketing-variable (per unit) Administrative-fixed (000s) Prior Year 1,800 units 2,000 units $ 0.60 $ 1,000 $ 0.40 $500 Current Year 2,200 units 2,000 units $ 0.60 $ 1,000 $ 0.40 $ 500 Required: 1. Prepare an income statement for each year based on full costing. 2. Prepare an income statement for each year based on variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior
year. These data summarize the current and prior year operations:
Sales (000s)
Production (000s)
Production cost
Factory-variable (per unit)
-fixed (000s)
Marketing-variable (per unit)
Administrative-fixed (000s)
Prior Year
1,800 units
2,000 units
$ 0.60
$1,000
$ 0.40
$ 500
Current Year
2,200 units.
2,000 units
$ 0.60
$ 1,000
$ 0.40
$ 500
Required:
1. Prepare an income statement for each year based on full costing.
2. Prepare an income statement for each year based on variable costing.
3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and
variable costing method.

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