Question

XYZ Company manufactures a unique device that is used by internet users to boost Wi-fi signals. The following data relates to the first month of operation:

Beginning inventory	0 units
Units produced	40,000 units
Units sold	35,000 units
Selling price	$120 per unit

Marketing and administrative expenses
Variable marketing and administrative expenses per unit	$4
Fixed marketing and administrative expenses per month	$1,120,000

Manufacturing costs
Direct materials cost per unit	$30
Direct labor cost per unit	$14
Variable manufacturing overhead cost per unit	$4
Fixed manufacturing overhead cost per month	$1,280,000

Using the information given, above:

1. Calculate unit product cost under the variable costing method and the absorption costing method
2. Prepare an Income Statement under the variable costing method, as well as the absorption costing method
3. Prepare a schedule to reconcile the net operating income under the variable and absorption costing methods

Answer 1