Deep Space Co

Deep Space Co. manufactures one product - spaceship exhaust pipes. It incurs direct materials costs of $1,500 per unit. The line workers are paid (in total) $100 per hour.

Deep Space pays its plant supervisors based in part on salary and in part on the number of units produced in a month. The information for the last seven months of supervisors’ salaries is as follows:

Month Total Pay Units Produced
Dec X1 $45,000 25,000
Jan X2 49,100 27,000
Feb X2 42,000 23,000
Mar X2 39,100 17,000
AprX2 48,000 26,000
May X2 44,000 24,000
June X2 40,000 19,000

For the month ended 6/30/X2, Deep Space sold 18,000 units at $2,700 per unit

Other information for the month ended June X2:
Fixed Manufacturing Costs (other than Supervisor’s Salary) $357,900
Fixed Selling & Administration Costs $60,000
Variable Selling & Administration Costs $300 per unit

At 5/31/X2, there were zero units in Ending Inventory (Deep Space sold its entire inventory).

For the month ended 6/30/X2, there were 160,000 of direct labor hours incurred.

Deep Space employs an actual costing system

REQUIRED: Provide the following (and support ALL of your work)–

a) Deep Space’s variable costing Income Statement for the month ended 6/30/X2
b) Deep Space’s absorption costing Income Statement for the month ended 6/30/X2
c) Reconcile and explain the difference between Deep Space’s Net Operating Income using variable costing and absorption costing.

HINT: You must figure out what all variable and fixed costs are before you can really start