Question: Your firm has just start to produce a new product. Revenue & cost data for the 1st period related to this product are as follows:
|
Beginning inventory
|
0
|
|
Units produced
|
40,000
|
|
Units sold
|
35,000
|
|
Selling price per unit
|
$60
|
|
Selling and administrative expenses
|
|
|
Variable cost per unit
|
$2
|
|
Total fixed costs
|
$560,000
|
|
Manufacturing costs
|
|
|
Direct materials per unit
|
$15
|
|
Direct labor per unit
|
$7
|
|
Variable mfg OH per unit
|
$2
|
|
Total fixed mfg OH
|
$640,000
|
REQUIRED:
[A] Using absorption costing:
[1] Calculate unit product cost
[2] Make an income statement for the period.
[B] Using variable costing:
[1] Calculate unit product cost
[2] Make an income statement for the period.
[C] Describe reason for any difference in the ending inventory balances under the two (2) costing methods & the impact of this difference on reported net operating income.