Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman

Exercise 12

UniCom
UniCom produces a wide range of consumer electronics. UniCom'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 UniCom plant for the years 2009 and 2010. Fixed manufacturing overhead amounted to $4 million in each year. At the start of 2009, there were no beginning inventories of either 2.4-GHz or 6.0-GHz cordless phones. UniCom uses FIFO to value inventories.
Required:
a. Prepare variable costing income statements for 2009 and 2010.
b. Prepare absorption costing income statements for 2009 and 2010. 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 2009 and 2010.