Absorption & Variable Costs

Business Costs	Product or Period Cost	Variable or Fixed Cost	Per Unit Cost (Variable) Annual Cost (Fixed)
Artist - contract	Product	Fixed	$10,000
Artist - design fee	Product	Fixed	$3,600
Computer/Printer	90% Product	Fixed	$5,400
Computer/Printer	10% Period	Fixed	$600
Depreciation - Computer/Printer	90% Product	Fixed	$1,800
Depreciation - Computer/Printer	10% Period	Fixed	$200
Depreciation - Heat Press Machine	Product	Fixed	$1,500
Heat Press Machine	Product	Fixed	$4,500
Liability Insurance	Period	Fixed	$3,600
Mall Rent (Manufacutring)	90% Product	Fixed	$27,000
Mall Rent (Non-Manufacturing)	10% Period	Fixed	$3,000
Owners (shared)	Period	Fixed	$12,000
Parties	Period	Fixed	$4,000
Storage Unit (Manufacturing)	Product	Fixed	$1,500
Inkjet Cartridges	Product	Variable	$0.10
Inkjet Cartridges	Period	Variable	$0.02
Laser Paper	Period	Variable	$0.02
Student Workers (3)	Product	Variable	$0.80
Student Workers (3)	Period	Variable	$0.40
T-shirts	Product	Variable	$3.75
Transfer Paper	Product	Variable	$0.40
Wrapping Paper/Box	Period	Variable	$0.20
Fixed (a) =	$68,200.00	(included list of fixed business costs)
Variable (b) =	$5.69	(included list of variable business costs)
Y =68200+5.69X

1. Continue to assume that 7,800 t-shirts will be made and sold in the first year. What is your product cost per unit under absorption costing? What is your product cost per unit under variable costing?
2. Based on the estimated sales level of 7,800 shirts for the first year, prepare your company's (forecasted) income statement for the year ended 12/31/2020 using both the (1) traditional format based on absorption costing and (2) the contribution format based on the variable costing.