Question

Nelter Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	130
Units in beginning inventory		150
Units produced		6,830
Units sold		6,850
Units in ending inventory		130
Variable costs per unit:
Direct materials	$	42
Direct labor	$	27
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	16
Fixed costs:
Fixed manufacturing overhead	$	157,090
Fixed selling and administrative expense	$	102,750

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:

a. Prepare a contribution format income statement for the month using variable costing.

b. Prepare an income statement for the month using absorption costing.

Answer 1