Walsh Company manufactures and sells one product. The followinginformation pertains to each of the company’s first two years ofoperations: Variable costs per unit: Manufacturing: Directmaterials $ 22 Direct labor $ 11 Variable manufacturing overhead $2 Variable selling and administrative $ 1 Fixed costs per year:Fixed manufacturing overhead $ 400,000 Fixed selling andadministrative expenses $ 70,000 During its first year ofoperations, Walsh produced 50,000 units and sold 40,000 units.During its second year of operations, it produced 40,000 units andsold 50,000 units. The selling price of the company’s product is$60 per unit. Required: 1. Assume the company uses variablecosting: a. Compute the unit product cost for Year 1 and Year 2. b.Prepare an income statement for Year 1 and Year 2. 2. Assume thecompany uses absorption costing: a. Compute the unit product costfor Year 1 and Year 2. b. Prepare an income statement for Year 1and Year 2. 3. Reconcile the difference between variable costingand absorption costing net operating income in Year 1.
