A. Unit product cost, profit and cost of ending inventory. Northern Bicycle produces an inexpensive motorbike that sells for 12,000. Selected data for the companys last year follow: Units in beginning inventory 300 Units produced 1,000 Units sold 800 Units in ending inventory 500 Variable cost per unit Direct materials 1,300 Direct labor 800 Manufacturing overhead 500 Selling and Administrative 200 Fixed cost per year Manufacturing overhead 4,000,000 Selling and Administrative 2,000,000 Required: 1. Compute the unit cost under absorption and variable costing methods. 2. Compute the operating income under the absorption and variable costing methods. 3. Compute the value of ending inventory under absorption and variable costing methods. 4. Reconcile the difference in operating income under the absorption and variable costing methods.

B. Operating income, volume variance. Holland products began operations on January 3 of the current year. Standards were established in early January assuming a normal production volume of 160,000 units. However, the company produced only 140,000 units of product and sold 100,000 units at a selling price of 180 per unit during the current year. Variable cost totaled 7,000,000, of which 60% were manufacturing and 40% were selling. There were no raw materials or work in process inventories at the end of the year. Actual input prices per unit of product and actual input quantitative per unit of product were equal to standard. Required: 1. Determine the cost of goods sold at standard cost, using full absorption costing (excluding standard cost variance). 2. How much cost would be assigned to ending inventory using direct costing? 3. Compute the factory overhead volume variance for the year. 4. How much would operating income be, using direct costing?

C. Reconciliation of profit and volume variance. Aldrin products has organized a new division to manufacture and sell specially designed tables for mounting and using personal computers. Its new plant is highly automated and requires high monthly fixed cost as shown below: Manufacturing costs: 300 Variable cost per unit Direct materials 1,300 Direct labor 800 Overhead 500 Fixed overhead Selling and Administrative 200 Variable Fixed During the month of operations, the following was recorded Units produced 4,000,000 Units sold 2,000,000 Selling price per unit Net materials variance-unfavorable Net direct labor variance-favorable Net variable overhead variance-favorable The company has a normal capacity of 6,000 units Required: 1. Unit inventoriable cost under absorption costing and variable costing. 2. Calculate the volume variance. 3. Cost of good sold at actual under absorption costing and variable costing. 4. Operating income under absorption costing and variable costing. 5. Reconciliation of income under absorption costing and variable costing.