Variable Costing Income Statement; Reconciliation (L02, 1031 During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Units produced Units sold Year 1 25,000 20,000 Year 2 25,000 30,000

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PROBLEM 8-11
Variable Costing Income Statement; Reconciliation
ⒸL03)
LO2,
During Durton Company's first two years of operations, the company reported variable costing operating income as
shown below. Production and cost data for the two years are given:
Units produced
Units sold
Sales (at $50 per unit)
Variable expenses:
Variable cost of goods sold (at $20 per unit)
Variable selling and administrative costs
(at $3 per unit)
Total variable expenses
Year 1
25,000
20,000
Year 1
$ 1,000,000
400,000
60,000
460,000
Year 2
25,000
30,000
Year 2
$1,500,000
600,000
90,000
690,000
Transcribed Image Text:PROBLEM 8-11 Variable Costing Income Statement; Reconciliation ⒸL03) LO2, During Durton Company's first two years of operations, the company reported variable costing operating income as shown below. Production and cost data for the two years are given: Units produced Units sold Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Year 1 25,000 20,000 Year 1 $ 1,000,000 400,000 60,000 460,000 Year 2 25,000 30,000 Year 2 $1,500,000 600,000 90,000 690,000
Sales (at $50 per unit)
Variable expenses:
Variable cost of goods sold (at $20 per unit)
Variable selling and administrative costs
(at $3 per unit)
Total variable expenses
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative
Total fixed expenses
Operating income (loss)
The company's $20 unit product cost is computed as follows:
Direct materials.
Direct labour
Variable manufacturing overhead
Unit product cost
Required:
1. Prepare an absorption costing income statement for each year.
The company's $20 unit product cost is computed as follows:
Direct materials
Direct labour
Variable manufacturing overhead
Unit product cost
Year 1
$1,000,000
400,000
60,000
460,000
540,000
350,000
250,000
600,000
$ (60,000)
Required:
1. Prepare an absorption costing income statement for each year.
2. Reconcile the absorption costing and variable costing operating income figures for each year.
Year 2
$1,500,000
600,000
90,000
690,000
810,000
350,000
250,000
600,000
$210,000
$8
10
2
$20
$8
10
2
$20
Page 330
Transcribed Image Text:Sales (at $50 per unit) Variable expenses: Variable cost of goods sold (at $20 per unit) Variable selling and administrative costs (at $3 per unit) Total variable expenses Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Total fixed expenses Operating income (loss) The company's $20 unit product cost is computed as follows: Direct materials. Direct labour Variable manufacturing overhead Unit product cost Required: 1. Prepare an absorption costing income statement for each year. The company's $20 unit product cost is computed as follows: Direct materials Direct labour Variable manufacturing overhead Unit product cost Year 1 $1,000,000 400,000 60,000 460,000 540,000 350,000 250,000 600,000 $ (60,000) Required: 1. Prepare an absorption costing income statement for each year. 2. Reconcile the absorption costing and variable costing operating income figures for each year. Year 2 $1,500,000 600,000 90,000 690,000 810,000 350,000 250,000 600,000 $210,000 $8 10 2 $20 $8 10 2 $20 Page 330
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