Question

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Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 40,000 units and sold 32,000 units at a price of $110 per unit.
  

Manufacturing costs
Direct materials per unit	$	42
Direct labor per unit	$	16
Variable overhead per unit	$	5
Fixed overhead for the year	$	360,000
Selling and administrative costs
Variable selling and administrative cost per unit	$	10
Fixed selling and administrative cost per year	$	105,000
1a. Assume the company uses absorption costing. Determine its product cost per unit. Per unit product cost using: Absorption costing Cost per unit

Answer 1

10 PER UNIT PRODUCT COST direct materials direct labor variable mfg oH fixed manufacturing OH unit product cost Absorption costing 42.00 16.00 5.00 9.00 72.00

1b 3520000 COOL SKY company Absorption costing income statement for the year ended sales less cost of goods sold direct matrial 1344000 direct labor 512000 variable OH 160000 fixed OH 288000 total cost of goods sold gross margin selling and administration expenses variable selling and adm expenses 320000 fixed selling and adm expenses 1,05,000 total selling and adm expenses net operating income (loss) 2304000 1216000 425000 791000

2a PER UNIT PRODUCT COST direct materials direct labor variable mfg oH unit product cost variable costing 42.00 16.00 5.00 63.00

2b 3520000 COOL SKY company income statement - variable costing for the year end sales less variable cost direct matrial 1344000 direct labor 512000 variable OH 160000 variable selling costs 320000 total variable costs contribution margin less fixed costs fixed manufacturing costs 3,60,000 fixed selling 1,05,000 total fixed cost net operating income (loss) 2336000 1184000 4,65,000 719000