Reference no: EM133109964
Question - Megatron Corporation produces and sells a single product plastic handles for knives. Selected cost and operating data relating to the product for two years are given below.
Selling price per unit $50
Manufacturing cost:
Variable per unit produced:
Direct Materials $11
Direct Labour $6
Variable Manufacturing overhead $3
Fixed Manufacturing overhead per year $120,000
Selling and administrative expenses:
Variable per unit sold $4
Fixed per year $70,000
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Year 1
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Year 2
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Units in beginning inventory
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0
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2,000
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Units produced during the year
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10,000
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6,000
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Units sold during the year
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8,000
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8,000
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Units in ending inventory
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2,000
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0
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Required -
1. Assume the company uses absorption costing.
-Compute the unit product cost for each year.
-Prepare an income statement for each year.
2. Assume the company uses variable costing.
-Compute the unit product cost for each year.
-Prepare an income statement for each year.
3. Reconcile the variable costing and absorption costing net operating incomes.
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