Bell Company manufactures and sells a single product. Cost data for the product follow: (Please explain steps)

Variable costs per unit:

Direct materials $11.5

Direct labor 46

Variable factory overhead 11.5

Variable selling and administrative 11.5

Total variable costs per unit $80.5

Fixed costs per month:

Fixed manufacturing overhead $1,008,000

Fixed selling and administrative 648,000

Total fixed cost per month $ 1,656,000

The product sells for $184 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

Units Produced Units Sold

May 24,000 20,000

June 24,000 28,000

Income statements prepared by the accounting department, using absorption costing.

May June

Sales $3,680,000 $5,152,000

Cost of goods sold 2,220,000 3,108,000

Gross margin 1,460,000 2,044,000

Selling and administrative expenses 878,000 970,000

Net operating income $582,000 $1,074,000

Required: 1. Determine the unit product cost under absorption costing and variable costing. Unit product cost: Absorption costing Variable costing

2. Prepare contribution format variable costing income statements for May and June.

Sales

Variable expenses:

BLANK

BLANK

options: Direct materials, fixed manufacturing overhead, fixed selling and administrative expenses, sales, variable cost of goods sold, variable selling and administrative expenses

Total variable expenses

BLANK: Contribution margin or Gross margin

Fixed expenses:

(1-2 SPOTS)BLANK: options: Direct materials, fixed manufacturing overhead, fixed selling and administrative expenses, sales, variable cost of goods sold, variable selling and administrative expenses

Total fixed expenses

Net Operating Income or Net Operating Loss

3. Reconcile the variable costing and absorption costing net operating incomes. (Loss and deduction amounts should be indicated with a minus sign.)

Bell Company Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes for May/June -

Variable costing net operating income (loss)

- Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing -

Absorption costing net operating income (loss)