You are the accountant for Evergreen Corporation. The controller has asked you to prepare absorption and...

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You are the accountant for Evergreen Corporation. The controller has asked you to prepare absorption and variable costing income statements for the past two years. You have gathered the following information. Budgeted Information for Both Years Budgeted production Budgeted fixed manufacturing Budgeted fixed operating expense Budgeted variable operating expense Budgeted variable manufacturing cost Budgeted selling price 75,000 units $420,000 $515,000 $10 per unit $25 per unit $75 per unit Budgeted and actual selling price and cost data are the same. Assume there are no price, spending, or efficiency variances. The production volume variance is written off at year-end as an adjustment to cost of goods sold. Opening finished goods inventory Actual units produced Sales volume Actual Sales and Production Information Year 1 0 70,000 65,000 Year 2 5,000 75,000 74,000 Required: 1. Prepare income statements for both years using absorption costing. (4 marks) 2. Prepare income statements for both years using variable costing. (4 marks) 3. Reconcile and explain the difference in operating income as calculated above (5 marks) You are the accountant for Evergreen Corporation. The controller has asked you to prepare absorption and variable costing income statements for the past two years. You have gathered the following information. Budgeted Information for Both Years Budgeted production Budgeted fixed manufacturing Budgeted fixed operating expense Budgeted variable operating expense Budgeted variable manufacturing cost Budgeted selling price 75,000 units $420,000 $515,000 $10 per unit $25 per unit $75 per unit Budgeted and actual selling price and cost data are the same. Assume there are no price, spending, or efficiency variances. The production volume variance is written off at year-end as an adjustment to cost of goods sold. Opening finished goods inventory Actual units produced Sales volume Actual Sales and Production Information Year 1 0 70,000 65,000 Year 2 5,000 75,000 74,000 Required: 1. Prepare income statements for both years using absorption costing. (4 marks) 2. Prepare income statements for both years using variable costing. (4 marks) 3. Reconcile and explain the difference in operating income as calculated above (5 marks)

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Income Statements using Absorption Costing Calculations Year 1 Sales Revenue Actual units sold 65000 units Selling price 75 per unit Sales Revenue 65000 units x 75 4875000 Cost of Goods Sold COGS Open... View the full answer