Hughes Satellite Corp. manufactures satellite dishes used in residential and commercial applications. For each unit the following costs apply: $50 for direct materials, $100 for direct labor, and $60 for variable overhead. The company's annual fixed overhead cost is $750,000; it uses expected capacity of 12,500 units produced as the basis for applying fixed overhead to products. A commission of 10% of the selling price is paid on each unit sold. Annual fixed selling and administrative expenses are $180,000. The following additional information is available:
2010 2011
Selling price per unit $500 $500
Number of units sold 10,000 12,000
Number of units produced 12,000 11,000
Beginning inventory (units) 7,500 10,000
Ending inventory (units) 10,000 ?
1. Assume the company uses absorption costing.
A. Compute the unit product cost in each year.
B. Prepare an income statement for the year.
2. Assume the company uses variable costing.
A. Compute the unit product cost in each year.
B. Prepare an income statement for the year.