Operating Data for Fowler Company and Its Absorption Costing Income

question 100

Essay

Operating data for Fowler Company and its absorption costing income statements for the last two years are presented below:
$\begin{array}{|l|r|r|} \hline& \text { Year 1 } & \text { Year 2 } \\\hline \text { Units in beginning inventory } & 0 & 3,000 \\\hline \text { Units produced } & 18,00 & 18,000 \\\hline \text { Units sold } & 15,000 & 20,000 \\\hline \text { Sales } & &\\\hline \text { Cost of goods sold: } & & \\\hline \text { Beginning inventory } & \$ 0 & \$ 30,000 \\\hline \begin{array}{l}\text { Add cost of goods } \\\text { manufactured }\end{array} & \underline{180,000} & \underline{180,000} \\\hline \text { Goods available for sale } & 180,00 & 210,000 \\\hline \text { Less ending inventory } & \underline{30,000} & \underline{10,000} \\\hline \text { Cost of goods sold } & 150,000 & 200,000 \\\hline \text { Gross margin } & 90,000 & 120,000 \\\hline \begin{array}{l}\text { Selling and administrative } \\\text { expense }\end{array} & \underline{80,000} & \underline{90,000} \\\hline \text { Operating income } & \$ 10,000 & \$ 30,000 \\\hline\end{array}$

Variable manufacturing costs are $6 per unit.Fixed manufacturing overhead totals $72,000 in each year.This overhead is applied at the rate of $4 per unit.Variable selling and administrative expenses were $2 per unit sold.
Required:
a)What was the unit product cost in each year under variable costing?
b)Prepare new income statements for each year using variable costing.
c)Reconcile the absorption costing and variable costing operating income for each year.

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Definitions:

Locomotion

The capability to transition between locations, encompassing activities such as walking, running, swimming, or flying.

Visually Tracking

The ability to follow the movement of an object with one's eyes, which is important for various cognitive and physical tasks.

Fast-moving Object

Refers to an object that is moving at a high speed, often requiring quick sensory and cognitive processing to perceive or interact with.

Months

Units of time, each roughly corresponding to one cycle of the moon's phases, used to measure periods within a year.