Question:
Justin and Andrea Doll Company produces and sells tennis balls. The following costs are available for the year ended December 31, 2012. The company has no beginning inventory. In 2012, 8,000,000 units were produced, but only 7,500,000 units were sold. The unit selling price was $0.50 per ball. Costs and expenses were:
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Variable costs per unit
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|
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Direct materials
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$0.10
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Direct labor
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0.05
|
|
Variable manufacturing overhead
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0.08
|
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Variable selling and administrative expenses
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0.02
|
|
Annual fixed costs and expenses
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|
Manufacturing overhead
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$500,000
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|
Selling and administrative expenses
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100,000
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(a) Compute the manufacturing cost of one unit of product using variable costing.
(b) Prepare a 2012 income statement for Justin and Andrea Doll Company using variable costing.