The Raptor Company had the following results for its first two years of operation: ...
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Accounting
The Raptor Company had the following results for its first two years of operation:
Year 1
Year 2
Sales
$1,200,000
$1,200,000
Cost of goods sold
600,000
600,000
Gross margin
600,000
600,000
Selling and administrative expense
200,000
200,000
Operating income
$400,000
$400,000
In Year 1, the company produced and sold 40,000 units of its only product, in Year 2, the company again sold 40,000 units, but increased production to 60,000 units. The company's variable production cost is $5 per unit, and its fixed manufacturing overhead cost is $620,000 a year. Fixed manufacturing overhead costs is $150,000. Variable selling and administrative expenses are $2 per unit sold.
Required:
Compute the unit product cost for each year under absorption costing and under variable costing. (Round to the nearest whole number).
Prepare an income statement for each year, using the contribution format with variable costing.
Reconcile the variable costing and absorption costing income figures for each year.
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