.4:

Dexter Corporation produces and sells a single product, a wooden hand loom for weaving small items such as scarves. Selected cost and operating data relating to the product for two years are given below:

Selling price per unit

$ 50

Manufacturing Costs:

Variable per unit produced

Direct Material

$11

Direct Labor

$6

Variable Overhead

$3

Fixed per year

$120,000

Selling & Administrative cost

Variable per unit sold

$4

Fixed per year

$70,000

Year 1

Year 2

Units in beginning inventory

0

2000

Units produced during the year

10,000

6000

Units sold during the year

8,000

8,000

Units in ending inventory

2000

0

REQUIRED:

1.Assume the company use Absorption Costing:

(a)Compute the unit product cost in each year.

(b)Prepare an income statement for each year.

2.Assume the company use Variable Costing:

(a)Compute the unit product cost in each year.

(b)Prepare an income statement for each year.

Reconcile the variable costing and absorption costing net operating incomes.