Question 3

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

Beginning inventory	$0
Units produced	25,000
Units 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 labour cost per unit	$50
Variable overhead cost per unit	$30
Fixed overhead (total)	$300,000

Assume that direct labour is a variable cost.

SHOW ALL CALCULATIONS a) What is the unit product cost for the month under absorption costing? b) What is the unit product cost for the month under variable costing?

c) Explain the difference between variable and absorption costing. d) Prepare an income statement for the month using the absorption costing method.