Viviana€™s Foods produces frozen meals that it sells for $11 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Viviana€™s Foods€™s first month in business:

Requirements
1. Compute the product cost per meal produced under absorption costing and under variable costing.
2. Prepare income statements for January 2016 using
a. Absorption costing.
b. Variable costing.
3. Is operating income higher under absorption costing or variable costing in January?

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January 2016 Units produced and sold: 800 meals 1,000 meals Sales Production Variable manufacturing cost per meal 5 Sales commission cost per meal Total fixed manufacturing overhead Total fixed selling and administrative costs 750 650