(San Churro manufactures Churro Maker Machines for restaurants in Indonesia. In November 2020, San Churro began producing the Churro Maker. During the month of November, 40,000 units were produced and 25,000 units were sold at $30 each. The following costs were incurred:)

Direct materials $ 72,000

Direct labor $ 15,000

Variable overhead $ 27,000

Fixed overhead $ 50,000

(A selling commission of 6 percent of sales price was paid. All administrative expenses are fixed amounted to $55,000.)

Required:

1. . Show the difference between calculation of product cost using absorption method and variable method.

2. Calculate the unit product cost and the cost of ending inventory using absorption and variable costing.

3. What is the contribution margin per unit using variable costing based on answer 2?

4.Company believes that the Churro Maker Machines will really take off after one year of sales. On the other hand, management thinks December 2021 sales will be twice as high as November 2020 sales. Prepare an income statement for December 2021 using the assumed higher level of sales. Which costing method should be used: absorption or variable costing?