Question
Advance Products, Inc., has just organized a new division to manufacture and sell specially designed tables using select hardwoods for personal computers. The division's monthly
Advance Products, Inc., has just organized a new division to manufacture and sell specially designed tables using select hardwoods for personal computers. The division's monthly costs are shown in the schedule below:
Manufacturing costs:
- Variable costs per unit:
- Direct materials: $86
- Variable manufacturing overhead: $4
- Fixed manufacturing overhead costs per month: $240,000
Selling and administrative costs:
- Variable: 15% of sales
- Fixed per month: $160,000
Advance Products regards all of its workers as full-time employees and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead.During the first month of operations, the following activity was recorded:
Units produced4,000
Units sold3,200
Selling price per unit$250
Required
a)Compute the unit product cost under absorption costing.
b)b)Compute the unit product cost under Variable costing.
c)Prepare income statement for the month using absorption costing
d)Prepare contribution format income statement for the month using variable costing
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