Product Cost per Unit and Income Reporting under Variable and Absorption Costing

Navarro Company began operations on January 1, Year 1. Cost and sales data for its first two years of operations are shown below.

Required
1. Compute product cost per unit under absorption costing and under variable costing.
2. Prepare an income statement for Year 1 under absorption costing and variable costing.
3. Prepare an income statement for Year 2 under absorption costing and variable costing.

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Manufacturing costs Direct materials... Direct labor... Overhead costs Variable... Fixed... Selling and administrative expenses Variable... Fixed ..... $80 per unit $120 per unit $30 per unit $140,000 per year $10 per unit $81,000 per year Production and sales Units produced, Year 1........... Units sold, Year 1 Units in ending inventory. Year 1..... 2,000 units 1,900 units 100 units Units produced, Year 2.. 2,000 units Units sold, Year 2... 2,100 units Units in ending inventory, Year 2..... 0 units Sales price per unit.... $500 per unit