Question No 1:

Dexter Corporation produces and sells a single product, a wooden hand loom for weaving small items such as scarves. Selected cost and operating data relating to the product for the first year 2015 is given below:

Selling price per unit $50 Manufacturing costs: Variable cost per unit produced: Direct materials $11 Direct labor $6 Variable manufacturing overhead $3 Fixed manufacturing overhead $1,20,000 Selling and administrative cost: Variable per unit sold $4 Fixed selling and administrative $70,000 Production and sales data are given below: Beginning inventory Unit produced during the year 10,000 Units sold during the year 8,000

Requirements: Assume the company uses the Variable costing:

1) Compute the unit product cost and prepare the income statement for the first year 2015.

2) If production is greater than sales then what happens to net operating income under variable and absorption costing?

3). Explain the reason for any difference in the ending inventory balances under the two costing methods and the impact of this difference on reported net operating income.