Fletcher Company manufactures and sells one product. Thefollowing information pertains to each of the company's first twoyears of operations: During its first year of operations, Fletcherproduced 50,000 units and sold 40,000 units. During its second yearof operations, it produced 40,000 units and sold 50,000 units. Theselling price of the company's product is $50 per unit. (1.) Assumethe company uses variable costing: (a.) Compute the unit productcost for year 1 and year 2.( b.) Prepare an income statement foryear 1 and year 2. (2) Assume the company uses absorption costing:a. Compute the unit product cost for year 1 and year 2. (b.)Prepare an income statement for year 1 and year 2. (3) Explain thedifference between variable costing and absorption costing netoperating income in year 1. Also explain why the two net operatingincomes differ in year 2.
Fletcher Company manufactures and sells one product. Thefollowing information pertains to each of the company's first twoyears of operations: During its first year of operations, Fletcherproduced 50,000 units and sold 40,000 units. During its second yearof operations, it produced 40,000 units and sold 50,000 units. Theselling price of the company's product is $50 per unit. (1.) Assumethe company uses variable costing: (a.) Compute the unit productcost for year 1 and year 2.( b.) Prepare an income statement foryear 1 and year 2. (2) Assume the company uses absorption costing:a. Compute the unit product cost for year 1 and year 2. (b.)Prepare an income statement for year 1 and year 2. (3) Explain thedifference between variable costing and absorption costing netoperating income in year 1. Also explain why the two net operatingincomes differ in year 2.
