Question
Question 2 Time: 24 minutes Total: 16 marks Stark, Inc., produces and sells a unique robot antenna. The company has just opened a new plant
Question 2
- Time: 24 minutes
- Total: 16 marks
Stark, Inc., produces and sells a unique robot antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been reported for the first month of the new plant's operation:
Selling price | $50 |
Beginning inventory | 0 |
Units produced | 35,000 |
Units sold | 30,000 |
Selling price per unit | $50 |
Selling and Admin expenses: |
|
Variable per unit | $2 |
Fixed (total) | $360,000 |
Manufacturing costs: |
|
Direct material cost per unit | $9 |
Direct labour cost per unit | $8 |
Variable overhead cost per unit | $3 |
Fixed overhead cost (Total) | $525,000 |
Management is anxious to see how profitable the new antenna will be and has asked that an income statement be prepared for the month. Assume that direct labour is a variable cost.
Submission Instructions:
- Assuming that the company uses absorption costing, compute the unit product cost and prepare an income statement.
- Assuming that the company uses variable costing, compute the unit product cost and prepare an income statement.
- Explain the reason for any difference in the ending inventories under the two costing methods and the impact of this difference on reported operating income.
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