Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The divisions monthly costs are shown in the schedule below:

Manufacturing costs:
Variable costs per unit:
Direct materials	$	156
Variable manufacturing overhead	$	16
Fixed manufacturing overhead costs (total)	$	570,230
Selling and administrative costs:
Variable		10	% of sales
Fixed (total)	$	336,750

Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $500 each.

During the first month of operations, the following activity was recorded:

Units produced		4,490
Units sold		3,420

Required:

1. Compute the unit product cost under each of the following costing method.

		Unit Product Cost
a.	Absorption costing
b.	Variable costing

2. Prepare an income statement for the month using absorption costing. (Do not leave any empty spaces; input a 0 wherever it is required.)

Cost of goods sold:

3. Prepare a contribution format income statement for the month using variable costing. (Do not leave any empty spaces; input a 0 wherever it is required.)

Variable expenses:
Variable cost of goods sold:
Fixed expenses:

4. Not available in Connect.

5. Reconcile the absorption costing and variable costing operating income figures in (2) and (3) above.

Variable costing operating income (loss)
Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing
Absorption costing operating income (loss)