Operating Data for Fowler Company and Its Absorption Costing Income

Essay

Operating data for Fowler 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 were $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 operating income for each year.