Problem
McCracken Aerial, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plant's operation:
Beginning inventory 0
Units produced 46,750
Units sold 41,000
Selling price per unit $ 78
Selling and administrative expenses:
Variable per unit $ 5
Fixed (total) $ 543,000
Manufacturing costs
Direct materials cost per unit $ 15.6
Direct labor cost per unit $ 7.8
Variable manufacturing overhead cost per unit $ 1
Fixed manufacturing overhead cost (total) $ 888,250
Because the new antenna is unique in design, management is anxious to see how profitable it will be and has asked that an income statement be prepared for the month.
Required:
1. Assume that the company uses absorption costing.
a. Determine the unit product cost.
b. Prepare an income statement for the month.
2. Assume that the company uses variable costing.
a. Determine the unit product cost.
b. Prepare a contribution format income statement for the month.