Dominica Company manufactures and sells a single product.Cost data for the product are given below.

Variable cost per unit$

Direct materials7

Direct labour10

Variable manufacturing overhead5

Variable selling and administrative3

Total variable cost per unit25

Fixed costs per month:

Manufacturing overhead315 000

Selling and administrative245 000

Total fixed costs per month560 000

The product is sold at $60 per unit.Beginning inventory for finished goods was 2 500 units.

Production and sales data for August are as follows:

UnitsUnits

ProducedSold

17 50020 000

The company's accounting department has prepared the following income statement for August using absorption costing:

August 2008

$

Sales1 200 000

Less cost of goods sold

Opening inventory100 000

Add cost of goods manufactured700 000

Goods available for sale800 000

Less ending inventory0

Cost of goods sold800 000

Gross margin400 000

Less selling and administrative expenses305 000

Net Income95 000

(i)Determine the cost of a single unit of the product under EACH of the following:

a)Absorption costing

b)Variable costing

(ii)Prepare Income Statement for August using the contribution format and

variable costing.

(iii)Reconcile the variable costing net income figures computed in (ii) above and the

absorption cost net income figure provided.

(iv)Briefly explain the MAIN difference between variable costing and absorption

costing in terms of the treatmentof costs in the financial statements.

(v)Explain why the variable costing income measurement approach would be

attractive to a manager who is interested in projecting her firm's future profit

performance.