Ireland Corporation Planned to Be in Operation for Three Years

question 70

Essay

Ireland Corporation planned to be in operation for three years.
• During the first year,2015,it had no sales but incurred $240,000 in variable manufacturing expenses and $80,000 in fixed manufacturing expenses.
• In 2016,it sold half of the finished goods inventory from 20x1 for $200,000 but it had no manufacturing costs.
• In 2017,it sold the remainder of the inventory for $240,000,had no manufacturing expenses and went out of business.
• Marketing and administrative expenses were fixed and totaled $40,000 each year.
Required:
a.Prepare an income statement for each year using absorption costing.
b.Prepare an income statement for each year using variable costing.

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Definitions:

Temporarily Operating

A status of business or facility operation for a limited period or until a specific event occurs, often used in contexts of transitional management or during emergencies.

Production Possibilities Curve

The Production Possibilities Curve is a graph that shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed.

Economic Growth

The escalation in the real value of products and services an economy produces, adjusted for inflation, over time.

Outward Shift

Refers to an expansion in an economy's production possibility frontier, indicating an increase in the ability to produce goods and services.