Reference no: EM13114535

Deep Space Co. manufactures one product - spaceship exhaust pipes. It incurs direct materials costs of $1,500 per unit. The line workers are paid (in total) $100 per hour.

Deep Space pays its plant supervisors based in part on salary and in part on the number of units produced in a month. The information for the last seven months of supervisors' salaries is as follows:

Month                          Total Pay                     Units Produced

Dec X1                        $45,000                       25,000

Jan X2                         49,100                         27,000

Feb X2                        42,000                         23,000

Mar X2                        39,100                         17,000

AprX2                          48,000                         26,000

May X2                       44,000                         24,000

June X2                       40,000                         19,000

For the month ended 6/30/X2, Deep Space sold 18,000 units at $2,700 per unit

Other information for the month ended June X2:

Fixed Manufacturing Costs (other than Supervisor's Salary)            $357,900

Fixed Selling & Administration Costs                                      $60,000

Variable Selling & Administration Costs                                             $300 per unit

At 5/31/X2, there were zero units in Ending Inventory (Deep Space sold its entire inventory).

For the month ended 6/30/X2, there were 160,000 of direct labor hours incurred.

Deep Space employs an actual costing system

REQUIRED: Provide the following (and support ALL of your work)-

a) Deep Space's variable costing Income Statement for the month ended 6/30/X2

b) Deep Space's absorption costing Income Statement for the month ended 6/30/X2

c) Reconcile and explain the difference between Deep Space's Net Operating Income using variable costing and absorption costing.

HINT: You must figure out what all variable and fixed costs are before you can really start