Valux Manufactures a Single Product and Sells It for $10

question 1

Essay

Valux manufactures a single product and sells it for $10 per unit. At the beginning of the year there were 1,000 units in inventory. Upon further investigation, you discover that units produced last year had $3.00 of fixed manufacturing cost and $2.00 of variable manufacturing cost. During the year Valux produced 10,000 units of product. Each unit produced generated $3.00 of variable manufacturing cost. Total fixed manufacturing cost for the current year was $40,000. There were no inventories at the end of the year.
Required:
a. Prepare two income statements for the current year, one on a variable cost basis and the other on an absorption cost basis.
b. Explain any difference between the two net income numbers and provide calculations supporting your explanation of the difference.

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Definitions:

Functional Autonomy

A concept in psychology that suggests certain behaviors might originate from past motivations but continue independently of those original reasons due to new motivations.

Adult Motivation

The reasons or incentives that drive behavior and decision-making in adults, often influenced by personal goals, needs, and desires.

Functional Autonomy

A concept in psychology where behaviors that once were driven by specific goals become an end in themselves due to repeated reinforcement.

Psychosexual Conflicts

Internal struggles arising from the sexual stages of development as described by Freud, often leading to personality issues if unresolved.