The company had the following data for 2020 and 2021: Variable cost per unit: $ Direct...

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The company had the following data for 2020 and 2021: Variable cost per unit: $ Direct materials 8.00 Direct labour 6.00 Variable overhead 4.00 Fixed costs per year Overhead $180,000 Selling and administrative $36,800 The company produced 40,000 units and sold 30,000 units in year one. In the second year, it produced 30,000 units and sold 40,000 units in the same year. The selling price in each of the years was $32.00. Required (1) Prepare income statements for both years using absorption costing. Has firm performance, as measured by operating income improved or declined from year 1 to Year 2? (2) Prepare income statements for both years using variable costing. The company had the following data for 2020 and 2021: Variable cost per unit: $ Direct materials 8.00 Direct labour 6.00 Variable overhead 4.00 Fixed costs per year Overhead $180,000 Selling and administrative $36,800 The company produced 40,000 units and sold 30,000 units in year one. In the second year, it produced 30,000 units and sold 40,000 units in the same year. The selling price in each of the years was $32.00. Required (1) Prepare income statements for both years using absorption costing. Has firm performance, as measured by operating income improved or declined from year 1 to Year 2? (2) Prepare income statements for both years using variable costing.

Answer rating: 100% (QA)

To prepare the income statements for both years using absorption costing we need to allocate fixed manufacturing overheads to the units produced The i... View the full answer