ViCom Produces a Wide Range of Consumer Electronics $\quad$ $\quad$

question 9

Essay

ViCom produces a wide range of consumer electronics. ViCom's Newark, New York, plant produces two types of cordless phones: 2.4 GHz and 6.0 GHz. The following table summarizes operations at the Newark ViCom plant for Year 1 and Year 2. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Year } 1 \quad\quad\quad\quad\quad \text { Year } 2$
$\begin{array}{|l|c|c|c|c|}\hline&2.4 & 6.0 & 2.4 & 6.0 \\ &\mathrm{GHz} & \mathrm{Ghz} & \mathrm{GHz} & \mathrm{Ghz}\\\hline \text { Units produced } & 120,000 & 70,000 & 90,000 & 50,000 \\\hline \text { Units sold } & 100,000 & 60,000 & 100,000 & 60,000 \\\hline \begin{array}{l}\text { Change in inventory } \\\text { (units) }\end{array} & 20,000 & 10,000 & -10.000 & 10,000 \\\hline\text {Variable}\\\text { manufacturing cost}\\\text { per unit:}\\\hline \text { Direct labor } & \$ 7.50 & \$ 8.00 & \$ 7.50 & \$ 8.00 \\\text { Direct material } & \$ 18.00 & \$ 24.00 & \$ 18.00 & \$ 24.00 \\\hline \text { Variable overhead } & \$ 2.00 & \$ 3.00 & \$ 2.00 & \$ 3.00 \\\hline \text { Selling price } & \$ 45.00 & \$ 78.00 & \$ 45.00 & \$ 78.00\\\hline\end{array}$ Fixed manufacturing overhead amounted to $4 million in each year. At the start of Year 1, there were no beginning inventories of either 2.4-GHz or 6.0-GHz cordless phones. ViCom uses FIFO to value inventories.
Required:
a. Prepare variable costing income statements for Year 1 and Year 2.
b. Prepare absorption costing income statements for Year 1 and Year 2. At the end of the year, fixed manufacturing overhead is absorbed to the two phone models using direct material as the allocation base.
c. Prepare a table that reconciles any differences in variable costing and absorption costing net incomes for Year 1 and Year 2.

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Definitions:

High-Performance Work System

An organizational approach that combines people, technology, and organizational structure to improve performance and competitiveness.

Traditional Management Practices

Conventional or classical methods and strategies used in the organization, planning, and controlling of an organization's resources and activities.

Recruitment Drive

An intensive effort or campaign by an organization to attract and hire new employees.

HR Audit

A comprehensive evaluation of an organization’s Human Resources policies, practices, procedures, and strategies to protect the company, ensure regulatory compliance, and improve the overall workforce performance.