The EG Company produces and sells one product. The following data refer to the year just completed:
|
|
|
| Beginning inventory |
|
0 |
| Units produced |
|
28,100 |
| Units sold |
|
21,900 |
|
|
|
| Sales price per unit |
$ |
410 |
| Selling and administrative expenses: |
|
|
| Variable per unit |
$ |
23 |
| Fixed (total) |
$ |
306,600 |
| Manufacturing costs: |
|
|
| Direct materials cost per unit |
$ |
229 |
| Direct labor cost per unit |
$ |
58 |
| Variable manufacturing overhead cost per unit |
$ |
36 |
| Fixed manufacturing overhead |
$ |
421,500 |
|
Assume that direct labor is a variable cost.
Required:
a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare a contribution format 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.