Question
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed: Beginning inventory 0Units produced 25,200Units sold 23,600Selling
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:
Beginning inventory 0Units produced 25,200Units sold 23,600Selling price per unit$428Selling and administrative expenses: Variable per unit$16Fixed per year$401,200Manufacturing costs: Direct materials cost per unit$281Direct labor cost per unit$53Variable manufacturing overhead cost per unit$40Fixed manufacturing overhead per year$378,000
Assume that direct labor is a variable cost.
Required:
a. Compute the unit product cost under both the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.
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