Exercise 69 Varlable and Absorption Costing Unit Product Cos

Exercise 6.9 Varlable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6-2, LO6-3 Walsh Company manufactures and sells one product The following Information pertains to each of the company\'s first two years of operations: lanufacturing Direct materials 29 1? Direct labor Variabie seliing and adninisEPaELVS ,?ned nanufacturing ov.rh.ad Päned eosts per year $320.00ee During its first year of operations, Walsh produced 50.000 units and sold 40.000 units produced 40,000 units and sold 50.000 units. The selling price of the company\'s product is $54 per unit. Its second year of operations, it Required: 1. Assume the company uses varlable costing a. Compute the unit product cost for Yoar 1 and Year 2 b. Prepare an Income statement for Year 1 and Year 2 2 Assume the company uses absorption costing a. Compute the unit product cost for Year 1 and Year 2 b. Prepare an Income statement for Year 1 and Year 2 3. Reconcile the difference between vartable costing and absorption costing net operating income in Year 1

Solution

Solution 1a:

Solution 1b:

solution 2a:

Solution 2b:

Solution 3:

Computation of Unit Product Cost - Variable Costing
Particulars	Year 1	Year 2
Unit Product Cost:
Direct material	$29.00	$29.00
Direct Labor	$17.00	$17.00
Variable manufacturing overhead	$5.00	$5.00
Unit Product Cost	$51.00	$51.00