Question - The Tijama Manufacturing Company has determined the cost of manufacturing a unit of product to be as follows, based onormal production of 50,000 units per year:
Direct materials $20.00
Direct labor 15.00
Variable factory overhead 10.00 $45.00
Fixed factory overhead 12.00
$57.00
Operating statistics for the month of August and September include
August September
Units produced 4,200 4,000
Units sold 3,500 4,200
Selling and administrative expenses $25,000 $35,000
The selling price is $70 per unit. There were no inventories on
August 1, and there is no work in process at September 30.
Prepare comparative income statements for each month under the following methods:
a. Absorption costing method
b. Direct costing method