For revision purpose only

Wynter Company manufactures and sells a single product. Its budgeted production stands at 25 000 units. The following costs were incurred during 2017, the company's first year of operations.

Variable cost per unit

Production

Direct materials $18

Direct labour 7

Variable manufacturing overhead 2

Fixed costs per year:

Manufacturing overhead $150 000

Selling and administrative $110 000

During 2017, the company produced 20 000 units and sold 16,000 units. The selling price of the company's product is $50 per unit

Required:

a) Compute the number of units in ending inventory. (1 mark)

b) Assume the company uses the absorption costing method:

i. Compute the cost to produce one unit of product (5 marks)

ii. Prepare an income statement for 2017. (7 marks)

c) Assume that the company uses the Marginal costing method:

i. Compute the cost of producing one unit of product. (3 marks)

ii. Prepare an income statement for 2017. (6 marks)

d) Reconcile the profits. (8 marks)