Maxim Manufacturing operations for 2022 are as follows:

Per unit: $

Sales price 50

Direct material cost 18

Direct wages 4

Variable production overhead 3

Per month:

Fixed production overhead 99 000

Fixed selling expenses 14 000

Fixed administration expenses 26 000

Variable selling expenses is 10% of sales value.

Normal capacity was 11 000 units per month.

October 2022 November 2022

Units Units

Sales 10 000 15 000

Production 12 000 16 000

Using the two methods:

1. Compute the unit production cost

2. Determine the value of the closing inventory

3. Prepare the Marginal Income Statement and the Absorption Income Statement for February 2022

4. Reconcile the net profits for February

5. Comment on the differences of the two systems with respect to:

Stock valuations

Period profits