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EXERCISE 6 12 Variable and Absorption Costing Unit Product Costs and Income Statements [LO1, LO2, LO3] Fletcher Company manufactures and sells one product The following information pertains to each

EXERCISE 6–12 Variable and Absorption Costing Unit Product Costs and Income Statements [LO1, LO2, LO3]

Fletcher Company manufactures and sells one product. The following information pertains to each

of the company’s first two years of operations:

 

 

During its first year of operations, Fletcher produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $50 per unit.

Required:

1.       Assume the company uses variable costing:

a.       Compute the unit product cost for year 1 and year 2.

b.       Prepare an income statement for year 1 and year 2.

2.       Assume the company uses absorption costing:

a.       Compute the unit product cost for year 1 and year 2.

b.       Prepare an income statement for year 1 and year 2.

3.       Explain the difference between variable costing and absorption costing net operating income in year 1. Also, explain why the two net operating incomes differ in year 2.

Jun 29 2020 View more View Less

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