Question

The Dean Corporation produces and sells a single product. The following data refer to the year just completed:

    

Beginning inventory		0
Units produced		29,700
Units sold		22,700
Selling price per unit	$	469
Selling and administrative expenses:
Variable per unit	$	20
Fixed (total)	$	522,100
Manufacturing costs:
Direct materials cost per unit	$	206
Direct labor cost per unit	$	53
Variable manufacturing overhead cost per unit	$	37
Fixed manufacturing overhead (total)	$	415,800

   

Assume that direct labor is a variable cost.

Required:

a.	Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.

       

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

       

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

       

d.	Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.

       

Answer 1