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Bell Company manufactures and sells a single product. Cost data for the product follow:
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Variable costs per unit:
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Direct materials
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$
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3
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Direct labor
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12
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Variable factory overhead
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3
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Variable selling and administrative
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3
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Total variable costs per unit
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$
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21
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Fixed costs per month:
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Fixed manufacturing overhead
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$
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120,000
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Fixed selling and administrative
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166,000
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Total fixed cost per month
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$
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286,000
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The product sells for $48 per unit. Production and sales data for May and June, the first two months of operations, are as follows:
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Units
Produced
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Units
Sold
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May
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24,000
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20,000
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June
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24,000
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28,000
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Income statements prepared by the accounting department, using absorption costing, are presented below:
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May
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June
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Sales
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$
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960,000
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$
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1,344,000
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Cost of goods sold
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460,000
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644,000
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Gross margin
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500,000
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700,000
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Selling and administrative expenses
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226,000
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250,000
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Net operating income
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$
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274,000
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$
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450,000
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Required:
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1.
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Determine the unit product cost under absorption costing and variable costing.
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2.
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Prepare contribution format variable costing income statements for May and June.
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3.
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Reconcile the variable costing and absorption costing net operating incomes. (Loss and deduction
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