Stark and Company would like to evaluate one of the product lines that they sell to the defense department. Every month the Stark and Company produce an identical number of units, although the sales in units differ from month to month.

Selling price	$130
Units in beginning inventory	0
Units produced	6,400
Units sold	6,100
Units in ending inventory	?
Variable costs per unit:
Direct materials	$62
Direct labour	$48
Variable manufacturing overhead	$3
Variable selling and administrative	$7
Fixed costs:
Fixed manufacturing overhead	$64,000
Fixed selling and administrative	$35,600

Required:

1. Under variable costing, identify the unit product cost for the month. (5 marks)

2. What is the unit product cost for the month under absorption costing? (5 marks)

3. Prepare an income statement for the month using the contribution format and the variable costing method. (15 marks)

Variable Costing Income Statement
Sales
Variable expenses:
Variable cost of goods sold:
Beginning inventory
Add: Variable manufacturing costs
Goods available for sale
Less: Ending inventory
Variable cost of goods sold
Variable selling expense
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative
Operating income