FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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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