78) Ewing Company planned to be in operation for three years. During the first year, it had no sales but incurred $120,000 in variable manufacturing expenses and $40,000 in fixed manufacturing expenses. In the next year, it sold half of the finished goods inventory from the previous year for $100,000 but it had no manufacturing costs. In the third year, it sold the remainder of the inventory for $120,000, had no manufacturing expenses and went out of business. Marketing and administrative expenses were fixed and totalled $20,000 each year.
a.Prepare an income statement for each year using absorption costing in the gross margin format.
b.Prepare an income statement for each year using variable costing contribution margin format.
79) Longview Golf Company sells a special putter for $20 each. In March it sold 28,000 putters while manufacturing 30,000. There was no beginning inventory on March 1. Production information for March was:
Direct manufacturing labour per unit15 minutes
Fixed selling and administrative costs $40,000
Fixed manufacturing overhead$132,000
Direct materials cost per unit$2
Direct manufacturing labour per hour$24
Variable manufacturing overhead per unit $4
Variable selling expenses per unit$2
a.Compute the cost per unit under both absorption and variable costing.
b.Compute the ending inventories under both absorption and variable costing.
c.Compute operating income under both absorption and variable costing.