Question 41

Fresh Air Products manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below:

Beginning inventory		0	units
Units produced		12,000
Units sold		10,000
Manufacturing costs
Fixed overhead		$108,000
Variable overhead		$3	per unit
Direct labour		$12	per unit
Direct material		$30	per unit
Selling and administrative costs
Fixed		$200,000
Variable		$4	per unit sold

The portable cooking unit sells for $110. Management is interested in the opening months results and has asked for an income statement. Assuming the company uses absorption costing:

Calculate the manufacturing cost per unit.

Manufacturing cost

$

per unit

2- Prepare an absorption-costing income statement for the first month of operation.