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Starfax, Incorporated, manufactures a small part that is widely used in various electronic products such as home computers. Results for the first three years of operations were as follows (absorption costing basis): In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% during Year 2 even though production increased during the year. Management had expected sales to remain constant at 51,600 units; the increased production was designed to provide the company with a buffer of protection against unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unlikely. To reduce the excessive inventories, Starfax cut back production during Year 3, as shown below: Additional information about the company follows: a. The company's plant is highly automated. Variable manufacturing expenses (direct materials, direct labor, and variable manufacturing overhead) total only $2.00 per unit, and fixed manufocturing overhead expenses total $495.360 per year b. A new fixed manufacturing overhead rate is computed each year based on that year's actual fixed manufacturing overhead costs divided by the actual number of units produced. c. Variable selling and administrative expenses were $1 per unit sold in each yeat Floed selling and administrative expenses totaled $141,280 per year. d. The company uses o FIFO inventory flow assumption. (FIFO means first-in first-out in other words, it assumes that the oldest units in inventory are sold first) Starfax's manogement can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurred during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each ycat 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each yeac. Complete this question by entering your answers in the tabs below. Prepare a variable costing income statement for each year. Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurre during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each year. 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year: 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. (Do not round intermediate calculations and round your final answers to 2 decimal places.) during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each year. 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. Reconcle the variable costing and absorption costing net operating income figures for each year. (Enter any losses or deductions as a negative value.) during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each year: 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Starfax, Incorporated, manufactures a small part that is widely used in various electronic products such as home computers. Results for the first three years of operations were as follows (absorption costing basis): In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax's sales dropped by 20% during Year 2 even though production increased during the year. Management had expected sales to remain constant at 51,600 units; the increased production was designed to provide the company with a buffer of protection against unexpected spurts in demand. By the start of Year 3, management could see that it had excess inventory and that spurts in demand were unlikely. To reduce the excessive inventories, Starfax cut back production during Year 3, as shown below: Additional information about the company follows: a. The company's plant is highly automated. Variable manufacturing expenses (direct materials, direct labor, and variable manufacturing overhead) total only $2.00 per unit, and fixed manufocturing overhead expenses total $495.360 per year b. A new fixed manufacturing overhead rate is computed each year based on that year's actual fixed manufacturing overhead costs divided by the actual number of units produced. c. Variable selling and administrative expenses were $1 per unit sold in each yeat Floed selling and administrative expenses totaled $141,280 per year. d. The company uses o FIFO inventory flow assumption. (FIFO means first-in first-out in other words, it assumes that the oldest units in inventory are sold first) Starfax's manogement can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurred during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each ycat 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each yeac. Complete this question by entering your answers in the tabs below. Prepare a variable costing income statement for each year. Starfax's management can't understand why profits doubled during Year 2 when sales dropped by 20% and why a loss was incurre during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each year. 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year: 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. (Do not round intermediate calculations and round your final answers to 2 decimal places.) during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each year. 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. Reconcle the variable costing and absorption costing net operating income figures for each year. (Enter any losses or deductions as a negative value.) during Year 3 when sales recovered to previous levels. Required: 1. Prepare a variable costing income statement for each year: 2. Refer to the absorption costing income statements above. a. Compute the unit product cost in each year under absorption costing. Show how much of this cost is variable and how much is fixed. b. Reconcile the variable costing and absorption costing net operating income figures for each year. 5b. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing? Complete this question by entering your answers in the tabs below. If Lean Production had been used during Year 2 and Year 3, what would the company's net operating income (or loss) have been in each year under absorption costing

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