Question 2 (25 marks) BARBARELLA MALLISSA Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit Manufacturing Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs per year. Fixed manufacturing overhead Fixed selling and administrative expense $25 12 3 5 200,000 110,000 During the year, the company produced 25,000 units and sold 21,000 units. The selling price of the company's product is $65 per unit. Required: 1. Assume that the company uses absorption costing. a. Compute the unit product cost. (5 marks) b. Prepare an income statement for the year (8 marks) Absorption Costing Income Statement Sales Cost of goods sold: Beginning inventory Add: Cost of goods manufactured Goods available for sale Less: Ending inventory Gross margin Selling and administrative expenses Operating income 2. Assume that the company uses variable costing, a. Compute the unit product cost. (2 marks) b. Prepare an income statement for the year. (10 marks) Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold: Beginning inventory Add: Variable manufacturing costs Goods available for sale Less: Ending inventory Variable cost of goods sold Variable selling expense Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Operating income