In the current year, TGIT Corp. produced 10,000 units and sold 8,000 of the units. The company incurred the following costs:

Direct materials used		$120,000
Direct labour cost		68,000
Variable manufacturing overhead		40,000
Fixed manufacturing overhead		60,000
Fixed selling and admin. expense		45,000
Variable selling and admin. expense		36,000

There was no beginning finished goods inventory and no beginning or ending work-in-process inventory.

Use the information provided to answer the following questions:

aa) Without doing any calculations, would net income be higher for the year under absorption costing or under variable costing?

AnswerVariable CostingAbsorption CostingNeitherUnknown

a) What is the product cost per unit?

Under variable costing?

$ Answer per unit

Under absorption costing?

$ Answer per unit

b) Would net income be higher for the year under absorption costing or under variable costing?

AnswerVariable CostingAbsorption CostingNeitherUnknown

And by what amount?

$ Answer

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c) Would both of your answers in b) be the same if you were told that on January 1, TGIT had 1,000 units in finished goods inventory with the same cost per unit? (HINT - reconcil beginning and ending inventory with this new scenario)

AnswerYesNoUnknown

d) If you were told that TGIT produced 10,000 units and sold 9,000 units, what is the product cost per unit?

Under variable costing?

$ Answer per unit

Under absorption costing?

$ Answer per unit

e) Would net income be higher for the year under absorption costing or under variable costing?

AnswerVariable CostingAbsorption CostingNeitherUnknown

And by what amount?

$ Answer

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f) If TGIT produced 8,000 units and sold 8,000 units, what is the product cost per unit? HINT: Don't forgot how costs behave when answering this question.

Under variable costing?

$ Answer per unit

Under absorption costing?

$ Answer per unit

g) Would net income be higher for the year under absorption costing or under variable costing?

AnswerVariable CostingAbsorption CostingNeitherUnknown

And by what amount?

$ Answer