Please show work? I want to understand this. Walsh Company manufactures and sell
ID: 2415427 • Letter: P
Question
Please show work? I want to understand this.
Walsh Company manufactures and sells one product. The following information pertains to each of the company's first two years of operations: Variable costs per unit: Manufacturing Direct materials Direct labor Variable manufacturing overhead S 30 $16 $ 6 $5 Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead $320,000 Fixed selling and administrative expenses 80,000 During its first year of operations, Walsh 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 $59 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for year 1 and year 2. Year 1 Year 2 Unit product costExplanation / Answer
Variable costing
Year 1 Year 2
Unit product cost
Number of units produced=50000 Number of units produced=40000
Variable cost per unit=$52 Variable cost per unit=$52
Fixed cost=0 Fixed cost=0
Selling price=$59 Selling price=$59
Unit product cost=Variable cost +Fixed cost/Number of units produced
Year 1 Year 2
Unit product cost= (52*50000)/50000 Unit product cost=(52*40000)/40000
Unit product cost=52 Unit product cost=52
Walsh Company
Income statement
Year 1
Year 2
Sales
A
2360000
2950000
Variable expenses
Variable cost of goods sold
2080000
2600000
Variable selling and administrative
200000
250000
Total variable expenses
B
2280000
2850000
Contribution margin
A-B=C
80000
100000
Fixed expenses
Fixed manufacturing overhead
320000
320000
Fixed selling and administrative expense
80000
80000
Total fixed expenses
D
400000
400000
Net operating income(loss)
C-D
-320000
-300000
2. Absorption costing
Unit product cost
Absorption costing
Year 1
Year 2
Direct materials
$30
$30
Direct labor
$16
$16
Variable manufacturing overhead
$6
$6
Fixed manufacturing overhead
320000
320000
Unit product cost
$60
$58
Income statement
Year1
Year2
Sales
2360000
2950000
Cost of goods sold
2400000
2920000
Gross margin
-40000
30000
Selling and administrative expenses
280000
330000
Net operating income(loss)
-320000
-300000
Walsh Company
Income statement
Year 1
Year 2
Sales
A
2360000
2950000
Variable expenses
Variable cost of goods sold
2080000
2600000
Variable selling and administrative
200000
250000
Total variable expenses
B
2280000
2850000
Contribution margin
A-B=C
80000
100000
Fixed expenses
Fixed manufacturing overhead
320000
320000
Fixed selling and administrative expense
80000
80000
Total fixed expenses
D
400000
400000
Net operating income(loss)
C-D
-320000
-300000