BIA Enterprises manufactures and sells one product. The following information pertains to each of the companyâs first two years of operations: Variable costs per unit: Manufacturing: Direct Materials $ 35 Direct Labor $ 25 Variable manufacturing overhead $ 7 Variable Selling and administrative $ 5 Fixed costs per year: Fixed manufacturing overhead $ 400,000 Fixed selling and administrative expenses $ 125,000 During its first year of operations, BIA produced 50,000 units and sold 40,000 units. During its second year of operations, BIA produced 40,000 and sold 50,000 units. The selling price of the companyâs product is $100 per unit. 1) Assume the company uses Variable Costing. a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2 using Variable Costing. 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 using Absorption Costing.
BIA Enterprises manufactures and sells one product. The following information pertains to each of the companyâs first two years of operations: Variable costs per unit: Manufacturing: Direct Materials $ 35 Direct Labor $ 25 Variable manufacturing overhead $ 7 Variable Selling and administrative $ 5 Fixed costs per year: Fixed manufacturing overhead $ 400,000 Fixed selling and administrative expenses $ 125,000 During its first year of operations, BIA produced 50,000 units and sold 40,000 units. During its second year of operations, BIA produced 40,000 and sold 50,000 units. The selling price of the companyâs product is $100 per unit. 1) Assume the company uses Variable Costing. a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2 using Variable Costing. 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 using Absorption Costing.
Related questions
Walsh Company manufactures and sells one product. The following information pertains to each of the companyâs first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 26 |
| Direct labor | $ | 16 |
| Variable manufacturing overhead | $ | 6 |
| Variable selling and administrative | $ | 5 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 320,000 |
| Fixed selling and administrative expenses | $ | 50,000 |
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 companyâs product is $57 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for Year 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 variable costing and absorption costing net operating income in Year 1.
