Skinny Dippers, Inc. produces nonfat frozen yogurt. The product is sold in five-gallon containers, which have the following price and variable costs.

Sales price

$15

Direct material

5

Direct labor

2

Variable overhead

3

Budgeted fixed overhead in 20x1, the company's first year of operations, was $300,000. Actual production was 150,000 five-gallon containers, of which 125,000 were sold. Skinny Dippers, Inc. incurred the following selling and administrative expenses.

Fixed

$50,000 for the year

Variable

$1 per container sold

Required:

1. Compute the product cost per container of frozen yogurt under (a) variable costing and (b) absorption costing.
2. Prepareoperating incomestatements for 20x1 using (a) absorption costing and (b) variable costing.