5. Maxwell Company manufactures and sells a single product. The following costs were incurred during the companys rst year of operations:

Variable costs per unit:

Manufacturing:

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . $17

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6

Variable manufacturing overhead . . . . . . . . . . . . $1

Variable selling and administrative . . . . . . . . . . . $3

Fixed costs per year:

Fixed manufacturing overhead. . . . . . . . . . . . . . . . . $16,000

Fixed selling and administrative expenses. . . . . . . . $11,000

During the year, the company produced 21,000 units and sold 19,000 units. The selling price of the companys product is $ 53.5 per unit.

Required:

1. Assume that the company uses absorption costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year. (2.5 marks)

2. Assume that the company uses variable costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year. (2.5 marks)