Fowler Company Manufactures a Single Product

question 40

Essay

Fowler Company manufactures a single product. Operating data for the company and its absorption costing income statements for the last two years are presented below:
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 are $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 net operating income for each year.

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Definitions:

Semantic Encoding

The process of encoding sensory input that has particular meaning or can be applied to a context, rather than merely being remembered as a visual or auditory stimulus.

Mnemonic

A memory aid, often a word, phrase, or visual image, designed to help remember information or a concept.

Phonemic

Relating to the system of phonemes in a language, that is, the smallest unit of sound that can distinguish meaning.

Structural

Pertaining to the underlying framework or organization of a system.