Sunshine Valley Meat Company produces one of the best sausage products in Pennsylvania. The company's controller compiled the following information by analyzing the accounting records: 1. Meat costs the company $3.25 per pound of sausage produced. 2. Compensation of production employees is $2.25 per pound of sausage produced. 3. Supervisory salaries total $23,000 per month. 4. The company incurs utility costs for the plant of $9,000 per month

5. There is an administrative cost of $0.35 per pound of sausage produced. 6. Insurance and property taxes of the plant average $6,400 per month.

ANSWERT THE FOLLOWING

A. Classify each cost as variable or fixed. Also state if each expenses is a manufacturing cost (product cost) or period cost.

B. Write a formula to express the behavior of the firm's production costs. (Use the form Y = a + bX, where X denotes the quantity of sausage produced.)

Assume that you make and sell 800 units of sausage products in the first year. Use your cost formula to calculate your first years total cost.

If you sell each product at $65 each (still assuming 800 units sold). how much would net profit be in the first year?

What is your product cost per unit under variable costing if 800 units of sausage products were sold?

What is your product cost per unit under absorption costing if 800 units of sausage products were planned and sold?

Is there a difference between net income in variable costing when compared to net income in absorption costing. Why or why not?