You own Drip Painting company, which employs several painters. Your newest employee says "Now that we've bought drop cloths paint rollers, and other supplies, we should maximize the number of paint jobs we do that way we'll spread those fxed costs over more production". You reply.

1. "Nope, average fixed costs don't fall as you produce more."
2. "Hang on, doing more paint jobs also involves hiring more painters - that variable cost is actually much bigger than the fixed cost of equipment.
3. "You're confusing supply and demand."
4. "You're right sounds great!"

Walsh company manufactures and sells one product. the following information pertains to each of the company’s first two years of operations: variable costs per unit: manufacturing: direct materials $ 25 direct labor $ 12 variable manufacturing overhead $ 5 variable selling and administrative $ 4 fixed costs per year: fixed manufacturing overhead $ 400,000 fixed selling and administrative expenses $ 60,000 during its first year of operations, walsh produced 50,000 units and sold 40,000 units. during its second year of operations, it produced 40,000 units and sold 50,000 units. the selling price of the company’s product is $83 per unit. required: 1. assume the company uses variable costing: 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 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. reconcile the difference between variable costing and absorption costing net operating income in year 1.