Exercise 5-9 Variable and Absorption Costing Unit Product Costs and Income Statements [LO5-1, LO5-2, LO5-3] Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations: Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $ $ 240,000 60,000 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 company's product is $58 per unit. 3. Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2. Year 1 Year 2 Variable costing net operating income (loss) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Deduct: Fixed manufacturing overhead cost released from inventory under absorption costing Absorption costing net operating income (loss) $ 0 $ 0 b. Prepare an income statement for year 1 and year 2. Walsh Company Income Statement Year 1 Sales $ 2,320,000 Variable expenses Variable cost of goods sold 1,920,000 Variable selling and administrative D 200,000 Year 2 2,900,000 $ 2,400,000 250,000 2,120,000 200,000 2,650,000 250,000 Total variable expenses Contribution margin Fixed expenses Fixed manufacturing overhead Fixed selling and administrative expensei 240,000 60,000 240,000 60,000 Total fixed expenses Net operating loss 300,000 $ (100,000) 300,000 (50,000) S