CS Company began its operations on January 1, 19X0, and produces a single product that sells for $7 per unit. Standard capacity is 100,000 units per year. 100,000 units were produced and 80,000 units were sold in 19X0.

Manufacturing costs and selling and administrative costs were as follows: ki5

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Direct materials Direct labor Factory overhead ($150,000 fixed) Selling and administrative costs ($80,000 fixed) Variable costs $1.50 per unit produced 1.00 per unit produced .50 per unit produced .50 per unit sold There were no variances from the standard variable costs. Any under- or overapplied factory overhead is written off at year-end as an adjustment to cost of goods sold. Required: a In presenting inventory on the balance sheet at December 31, 19X0, what is the unit cost under absorption costing? b What is net income in 19X0 under direct costing? (AICPA Adapted.)