Problem: Lehne Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling Price $112
Units in beginning inventory 500
Units produced 2,600
Units sold 3,000
Units in ending inventory 100
Variable Costs Per Unit:
Direct Materials $13
Direct Labor $49
Variable Manufacturing OH $6
Variable Selling and Admin $10
Fixed Costs:
Fixed Manufacturing OH $80,600
Fixed Selling and Admin $15,000
The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
Required to do:
Q1. What is the unit product cost for the month under variable costing?
Q2. What is the unit product cost for the month under absorption costing?
Q3. What is the Net Operating Income using the variable costing method?
Q4. What is the Net Operating Income using the absorption costing method?
Q5. Disregarding the results above, explain the differences between the absorption and the variable costing income statements in general terms.