BC Apparels Company has the option to use variable costing and absorption costing methods.

The Management Accountant Company has compiled the following information:

Fixed costs

Fixed overheads $$60000$

Fixed selling and administrative costs $,$$$80000$

Unit selling price

$$50$

Cost per unit:

Direct materials $$10$

Direct labour $$6$

Variable overhead $$2$

Variable selling expenses $$12$

Beginning inventory $($units$),1500$

Units produced $15000$

Required:

$($a$)$ Calculate the following using variable costing:

$($i$)$ Per unit production $($manufacturing$)$ cost$.$

$($ii$)$ Number of units in ending inventory.

$($iii$)$ Cost of ending inventory.

$($iv$)$ Cost of goods sold.

$($b$)$ Prepare a contribution margin income statement for BC Apparels Company using

variable costing.

$($c$)$ Explain the difference and reasons any change, if any, in the operating profits between

the two costing methods?

$($d$)$ Under Generally Accepted Accounting Principles $($GAAP$),$ the absorption accounting

costing method is required for external reporting. Discuss the benefits of using this

method for the purpose of external reporting.