Fowler Corporation Manufactures a Single Product

Essay

Fowler Corporation 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 fixed manufacturing overhead is applied at the rate of $4 per unit. Variable selling and administrative expenses are $2 per unit sold.
Required:
a. Compute 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.