Brown Printing, a small family-owned business, began operations on March 1, manufacturing premium quality books. The owners have expertise in printing but no accounting knowledge or experience. The company's independent accountant compiled the following data for the month of March. They have also requested an income statement.

  

Sales price	$90 per book
Number of units produced	16,000 books
Number of units sold	12,000 books
Direct materials cost	$15 per book
Direct labor cost	$6 per book
Variable manufacturing overhead	$4 per book
Fixed manufacturing overhead	$240,000 per month
Selling cost	$3 per book
Administrative expenses	$170,000 per month

The owners want to understand these numbers and how they can use the information to run the business.

Essay Questions

• Define and explain absorption and variable costing.
• Calculate the unit cost of goods sold using variable costing.