During Goodluck Company's first 2 years of operations, the company reported the following net income as follows: Year 1 Year 2 Sales @ $25 Cost of goods sold @ $18 Gross profit Selling and administrative expenses ($2 per unit variable; $130 fixed each year) per unit $1,000,000 $1.250,000 per unit (720,000) (900,000) 280,000 350,000 (210,000) (230,000) Net income 70,000 120,000 The company's $18 unit product cost is computed as follows: Direct materials $4 Direct labour $7 Variable Manufacturing overhead Fixed manufacturing overhead ($270,000 ÷ 45,000 units $1 $6 Production and cost data for the two years are Year 1 Year 2 Units produced 45,000 45,000 50,000 Units sold 40,000 Required: a) Compute the product cost. b) Prepare a variable costing contribution format income for Year 1 and Year 2

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Question 1
During Goodluck Company's first 2 years of operations, the company reported the following net
income as follows:
Year 1
Year 2
Sales @ $25
Cost of goods sold @ $18 per unit
Gross profit
Selling and administrative expenses
per
unit
$1,000,000
$1.250,000
(720,000)
(900,000)
280,000
350,000
(210,000)
(230,000)
($2 per unit variable; $130 fixed each year)
Net income
70,000
120,000
The company's $18 unit product cost is computed as follows:
Direct materials
$4
Direct labour
$7
Variable Manufacturing overhead
Fixed manufacturing overhead ($270,000 + 45,000 units
$1
$6
Production and cost data for the two years are
Year 1
Year 2
Units produced
Units sold
45,000
40,000
45,000
50,000
Required:
а)
Compute the product cost.
b)
Prepare a variable costing contribution format income for Year 1 and Year 2
Transcribed Image Text:Question 1 During Goodluck Company's first 2 years of operations, the company reported the following net income as follows: Year 1 Year 2 Sales @ $25 Cost of goods sold @ $18 per unit Gross profit Selling and administrative expenses per unit $1,000,000 $1.250,000 (720,000) (900,000) 280,000 350,000 (210,000) (230,000) ($2 per unit variable; $130 fixed each year) Net income 70,000 120,000 The company's $18 unit product cost is computed as follows: Direct materials $4 Direct labour $7 Variable Manufacturing overhead Fixed manufacturing overhead ($270,000 + 45,000 units $1 $6 Production and cost data for the two years are Year 1 Year 2 Units produced Units sold 45,000 40,000 45,000 50,000 Required: а) Compute the product cost. b) Prepare a variable costing contribution format income for Year 1 and Year 2
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