ViCom Produces a Wide Range of Consumer Electronics $\quad$ $\quad$

Essay

ViCom produces a wide range of consumer electronics. ViCom's Newark, New York, plant produces two types of cordless phones: 2.4 GHz and 6.0 GHz. The following table summarizes operations at the Newark ViCom plant for Year 1 and Year 2. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Year } 1 \quad\quad\quad\quad\quad \text { Year } 2$
$\begin{array}{|l|c|c|c|c|}\hline&2.4 & 6.0 & 2.4 & 6.0 \\ &\mathrm{GHz} & \mathrm{Ghz} & \mathrm{GHz} & \mathrm{Ghz}\\\hline \text { Units produced } & 120,000 & 70,000 & 90,000 & 50,000 \\\hline \text { Units sold } & 100,000 & 60,000 & 100,000 & 60,000 \\\hline \begin{array}{l}\text { Change in inventory } \\\text { (units) }\end{array} & 20,000 & 10,000 & -10.000 & 10,000 \\\hline\text {Variable}\\\text { manufacturing cost}\\\text { per unit:}\\\hline \text { Direct labor } & \$ 7.50 & \$ 8.00 & \$ 7.50 & \$ 8.00 \\\text { Direct material } & \$ 18.00 & \$ 24.00 & \$ 18.00 & \$ 24.00 \\\hline \text { Variable overhead } & \$ 2.00 & \$ 3.00 & \$ 2.00 & \$ 3.00 \\\hline \text { Selling price } & \$ 45.00 & \$ 78.00 & \$ 45.00 & \$ 78.00\\\hline\end{array}$ Fixed manufacturing overhead amounted to $4 million in each year. At the start of Year 1, there were no beginning inventories of either 2.4-GHz or 6.0-GHz cordless phones. ViCom uses FIFO to value inventories.
Required:
a. Prepare variable costing income statements for Year 1 and Year 2.
b. Prepare absorption costing income statements for Year 1 and Year 2. At the end of the year, fixed manufacturing overhead is absorbed to the two phone models using direct material as the allocation base.
c. Prepare a table that reconciles any differences in variable costing and absorption costing net incomes for Year 1 and Year 2.