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Problem II. Loker Corp. makes and sells garden hoses in 50 ft. lengths. The following information is available for the year just ended, the company’s

Problem II.

Loker Corp. makes and sells garden hoses in 50 ft. lengths.  The following information is available for the year just ended, the company’s first year of operations:

Units produced: 8,000 Variable costs per unit:
Units sold: 6,000

Manufacturing (Direct Materials, Direct Labor, and Variable Overhead) – $12.00 (total) Selling and Admin. – $2.00
Selling price:$25.00 per unit  
  Total fixed costs:
  Overhead – $7,200
  Selling and Admin.- $5,000

REQUIRED (You can use abbreviations if you wish.  Organize your answers in a readable way using the columns and rows below.):

  1. Compute the cost of one unit of product using absorption costing.
  2. Compute the cost of one unit of product using variable costing.
  3. Prepare an income statement for the year in the proper format using absorption costing.
  4. Prepare an income statement for the year in the proper format using variable costing.
  5. Provide a quantitative explanation/reconciliation of why the two net income amounts that you calculated above are different (or the same).
Unit Cost: Absorption   Unit Cost: Variable  
       
       
       
       
       
       
       
Income Statement: Absorption   Income Statement: Variable     
       
       
       
       
       
       
       
       
       
       
       
       
       
       
Reconciliation:      
       
       
       
       
       
       
       
       

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