Q.10

Pioneer Company manufactures and sells a single product.

Cost data for the product as follows:

Variable costs per unit:

Direct materials $ 6.00

Direct labor 12.00

Variable factory overhead 4.00

Variable selling and administrative 3.00

Fixed costs per month:

Fixed manufacturing overhead $240,000

Fixed selling and administrative 180,000

The product sells for $40 per unit.

Production and sales data for May and June, the first two months of operations, are as follows:

Units Units

Produced Sold

May 30,000 26,000

June 30,000 34,000

Required:

a. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

b. Prepare Income Statement under Absorption costing for the month of May Only

c. Prepare contribution format variable costing income statements for May and June.

d. Reconcile the variable costing and absorption costing net operating income of May