Wellington Company Reported Net Income of $60,000 in 2017 and $80,000

question 20

Essay

Wellington Company reported net income of $60,000 in 2017 and $80,000 in 2018. However, ending inventory was overstated by $7,000 in 2017.
Instructions
Compute the correct net income for Wellington Company for 2017 and 2018.

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Definitions:

Variable Cost Per Unit

The cost that changes in proportion with the production volume or activity level.

Units Produced

The total number of finished units that have been manufactured during a specific time period.

Fixed Cost Per Unit

The cost that remains constant in total but varies inversely with the level of production or sales volume.

Relevant Range

The range of activity or volume over which the assumptions about variable and fixed cost behaviors hold true, beyond which cost patterns may change.