Question
Legaz Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price..........................................................$120 Units in beginninginventory.................................100 Units
Legaz Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price..........................................................$120
Units in beginninginventory.................................100
Units produced......................................................3,900
Units sold..............................................................3,600
Units in endinginventory.......................................400
Variable costs per unit:
Directmaterials......................................................$31
Direct labour............................................................$54
Variable manufacturing overhead ......................... $5
Variable selling and administrative ........................ $8
Fixed costs:
Fixed manufacturingoverhead...........................$54,600
Fixed selling and administrative ........................ $21,600
The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
Required:
a. What is the unit product cost for the month under variable costing? (2 marks)
b. What is the unit product cost for the month under absorption costing? (2 marks)
c. Prepare income statement for the month using the contribution (the variable
costing method). (2 marks)
d. Prepare income statement for the month using the absorption costing method. (2 marks)
e. Reconcile the variable costing and absorption costing net operating incomes for the month. (2 marks)
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