Question

1) The variable costing income statement format shows costs separated by cost behaviour rather than function. TRUE or FALSE

2) The absorption costing format is best for internal decision-making. TRUE or FALSE

3) XYZ Inc. sells a single product for $20 per unit. Direct materials costs were $6 per unit, while direct labour and variable manufacturing overhead costs were $3 and $2 respectively. Fixed manufacturing overhead costs amount $20,000 per month. The company has a practical production capacity of 10,000 units per month. Variable selling costs are $2 per unit. Fixed selling costs are $10,000 per month. Last month, the company produced 20,000 units and sold 8,000 units. What is the company's product cost per unit using absorption costing?

4) XYZ Inc. sells a single product for $20 per unit. Direct materials costs were $6 per unit, while direct labour and variable manufacturing overhead costs were $5 and $2 respectively. Fixed manufacturing overhead costs amount $20,000 per month. The company has a practical production capacity of 10,000 units per month. Variable selling costs are $2 per unit. Fixed selling costs are $10,000 per month. Last month, the company produced 10,000 units and sold 8,000 units. What is the company's product cost per unit using variable costing?

Answer 1

Q1.
True.
Q2.
FALSE
For management decision, the variable costing is more useful.
Q3.
Answer is $ 12 per unit
Explanation:
Unit product cost under Absorption:
Material				6
Labour cost			3
Variable Mfg overheads		2
Fixed Mfg overheads (20,000/20,000)	1
Unit product cost under Absorption:	12
Q4.
Answer is $ 13 per unit
Explanation:
Unit Product cost under Variable:
Material				6
Labour cost			5
Variable Mfg overheads		2
Unit Product cost under Variable:	13