Question

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

Selling price	$	109
Units in beginning inventory		935
Units produced		2,370
Units sold		2,930
Units in ending inventory		375
Variable costs per unit:
Direct materials	$	24
Direct labor	$	25
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	16
Fixed costs:
Fixed manufacturing overhead	$	61,620
Fixed selling and administrative expense	$	8,790

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. What is the unit product cost for the month under variable costing?

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

c. Without preparing an income statement, determine the absorption costing net operating income for the month. (Hint: Use the reconciliation method.)

Answer 1