Assignment
Paint More LLC has organized a new division to manufacture and sell specialty paint. The division's monthly costs are shown below:
Manufacturing costs:
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Manufacturing costs:
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Variable costs per unit:
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Direct materials
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$12
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Variable manufacturing overhead
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$1
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Fixed manufacturing overhead costs (total)
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$100,000
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Selling and administrative costs:
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Variable
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7% of sales
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Fixed (total)
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$31,000
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Because the production is highly automated, the company includes its labor costs in its fixed manufacturing overhead. The gallons of paint sell for $68 each. During September, the first month of operations, the following activity was recorded:
Units produced 5,000
Units sold 4,000
1. Compute the unit product cost under:
i. Absorption costing
ii. Variable costing
2. Prepare an absorption costing income statement for September
3. Prepare a contribution format income statement for September using variable costing.