Question

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

Selling price	$110
Units in beginning inventory	0
Units produced	4,600
Units sold	4,200
Units in ending inventory	400
Variable costs per unit:
Direct materials	$46
Direct labour	$28
Variable manufacturing overhead	$5
Variable selling and administrative	$10
Fixed costs:
Fixed manufacturing overhead	$55,200
Fixed selling and administrative	$25,200

Required:

a) What is the unit product cost for the month under variable costing?
b) Prepare an income statement for the month using the contribution format and the variable costing method. (you can use a collapsed cost of goods sold (i.e. one number) or an expanded cost of goods sold (i.e. using inventory).
c) Without preparing an income statement, determine the absorption costing operating income for the month. (Hint: Use the reconciliation method.)

Answer 1