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Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations:
Prior Year Current Year
Sales 1,800 units 2,200 units
Production 2,000 units 2,000 units
Production cost
Factory—variable (per unit) $ 0.60 $ 0.60
—fixed $ 1,000 $ 1,000
Marketing—variable $ 0.40 $ 0.40
Administrative—fixed $ 500 $ 500
Required:
a. Prepare an income statement for each year based on full costing.
prior year prior year current year current year
sales $5400 $6600
less: cost of goods sold
cost of production
?
?
available for sale
?
?
cost of good sold
gross margin
less selling and administrative costs
?
?
?
operating income
b. Prepare an income statement for each year based on variable costing.
same table as part A
c. Prepare a reconciliation and explanation of the difference each year in the operating income resulting from using the full-costing method and variable-costing method. (Negative amounts should be indicated by a minus sign.)
prior year current year
change in inventory in units
multiply times fixed overhead rate
difference in operating income
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Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no be...
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