During its first year of operations Walsh produced 50000 uni

During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $52 per unit.

Variable costs per unit: Manufacturing: 21 12 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 2 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $240,000 $ 50,000

Solution

2A Unit product cost Year 1 = 21+12+3+(240000/50000)= 40.8 Unit product cost Year 2 = 21+12+3+(240000/40000)= 42 2B Income Statement Year 1 Year 2 Sales 2080000 2600000 Cost of goods sold 1632000 2088000 Gross margin 448000 512000 Selling and administrative expenses: 130000 150000 Net operating income 318000 362000