Diego Company manufactures one product that is sold for $77 per unit. The following information pertains to the companys first year of operations in which it produced 59,000 units and sold 54,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	27
Direct labour	$	10
Variable manufacturing overhead	$	2
Variable selling and administrative	$	3
Fixed costs per year:
Fixed manufacturing overhead	$	1,298,000
Fixed selling and administrative expenses	$	662,000

Required:

1. What is the unit product cost under variable costing?

2. What is the unit product cost under absorption costing?

3. What is the companys total contribution margin under variable costing?

4. What is the companys net operating income (loss) under variable costing?

5. What is the companys total gross margin under absorption costing?

6. What is the companys net operating income (loss) under absorption costing?

7. What is the amount of the difference between the variable costing and absorption costing net operating incomes (losses)?

8. What is the companys break-even point in unit sales?

Is it above or below the actual sales volume?

• Above

• Below

9. What would have been the companys variable costing net operating income (loss) if it had produced and sold 54,000 units?

10. What would have been the companys absorption costing net operating income (loss) if it had produced and sold 54,000 units

11. If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2?

• Lower

• Higher

-The company's variable costing net operating income:"-

Units	54,000
Sales (54,000*$77)	$4,158,000
Low: Variable COGS (54,000*39) ($27+$10+$2)	$2,106,000
Low: Variable selling and administrative expenses (54,000x$3)	$162,000
Contribution Margin	$1,890,000
Low:Fixed manufacturing overhead	$1,298,000
Low: Fixed selling and administrative expenses	$662,000
Net Operating Income / (Loss)	($70,000)

solution 9 :

Sales (54,000*$77)	$ 4,158,000
Cost of goods sold (54,000x($27+10+2)+$1,298,000)	$ 3,404,000
Gross margin	$ 754,000
Selling and administrative expenses
Variable selling administrative expenses (54,000x$3)	$ 162,000
Fixed selling and administrative expenses	$ 662,000
net operating income (Loss)	$ (70,000)

Solution 1 :

direct material cost is = $27

direct labour is = $10

variable manufacturing oh is = $2

unit product cost is = $39

need the other questions answered