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EXAM2 - ::30Points . . follows 2005 2006 2007 Producti

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Comprehensive Problem:  Variable and Absorption Costing :  30 Points Sydney’s Snow Shovel Company began operations in 2005.  The company uses actual costing and  carries no Work In Process Inventories.  Production and Sales figures for the last three years are as  follows:    2005       2006       2007    Production (in units)    42,000           48,000         35,000 Sales (in units)            38,500            40,000         45,000 For each year, variable production costs were $9 per unit, variable selling expenses were $1.50 per  unit, fixed overhead was $84,000 per year, and fixed selling expenses were $152,000 per year.  The  selling price each year was $30.  The company uses the FIFO method to assign costs to Finished  Goods inventories. A. Prepare, in good form, an absorption costing income statement for 2006.  You do not need a  heading on your statement, but you do need a complete Cost of Goods Sold section.  (11 points)
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B. Prepare, in good form, a variable costing income statement for 2007 (notice that this is a different   year from the requirement in part A of this problem. (12 points)
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C. Using your variable costing income figure from part B of this problem, prepare a reconciliation to  show what absorption costing income would be for the year 2007.  Do NOT prepare an absorption  costing income statement for 2007.  Just prepare a reconciliation. (7 points)  You will only receive  credit for the reconciliation. 1. A is a fixed cost; B is a variable cost.  During the current year, the level of activity has  decreased but is still within the relevant range.  We would expect that
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