Problem 1

The EG Company produces and sells one product. The following data refer to the year just completed:

Beginning inventory	0
Units produced	25,000
Unit sold	20,000
Sales price per unit	$400
Selling and administrative expenses
Variable per unit	$15
Fixed ( total )	$275,000
Manufacturing costs :
Direct materials cost per unit	$200
Direct labor cost per unit	$50
Variable manufacturing overhead cost per unit	$30
Fixed manufacturing overhead ( total )	$300,000

Assume that direct labor is a variable cost. Required: a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches. b. Prepare an income statement for the year using absorption costing. c. Prepare a contribution format income statement for the year using variable costing. d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.

Problem 2

Pressler Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.

Equipment depreciation ( total )	$27,000
Indirect labor ( total )	$7,000

Distribution of resource consumption across activity cost pools
	Machining	Setting up	other
Equipment depreciation	0.40	0.30	0.30
Indirect labor	0.20	0.30	0.50

Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.

	MHs	Batches
Product S4	8,100	400
Product V6	1,900	1,600
Total	10,000	2,000

Additional data concerning the company's products appears below:

	Product S4	Product V6
Sales ( total )	$71,400	$57,600
Direct materials ( total )	$21,900	$19,900
Direct labor ( total )	$33,700	$25,100

Required: a. Assign overhead costs to activity cost pools using activity-based costing. b. Calculate activity rates for each activity cost pool using activity-based costing. c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. d. Determine the product margins for each product using activity-based costing.