Question
ABC manufacturing company produces a single product and has provided the following data concerning its most recent month of operations: Total sales $215,000 Variable costs
ABC manufacturing company produces a single product and has provided the following data concerning its most recent month of operations:
Total sales | $215,000 |
|
|
Variable costs per unit |
|
Direct materials | $25 |
Direct labour | 30 |
Manufacturing overhead | 5 |
Selling and administration | 6 |
|
|
Fixed costs (total) |
|
Manufacturing overhead | 6,000 |
Selling and administration | 8,000 |
|
|
Units in beginning inventory | 0 units |
Sales | 1,400 units |
Units in ending inventory | 200 units |
Required
a) Calculate the per unit cost under variable and absorption costing.
b) Prepare a statement of income for the month using absorption costing. Show all of your work.
c) Without calculations, would the income be higher or lower under variable costing? Explain why.
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