Problem:
1. Blue Sky Company reports the following costing data on its product for its first year of operations. During this first year, the company produced 44,000 units and sold 36,000 units at a price of $140 per unit.
Production costs
Direct materials per unit . . . . . . . . . . . . . . . . . . . . . . . . $60
Direct labor per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . $22
Variable overhead per unit . . . . . . . . . . . . . . . . . . . . . . $8
Fixed overhead for the year . . . . . . . . . . . . . . . . . . . . . $528,000
Selling and administrative cost
Variable selling and administrative cost per unit . . . . . $11
Fixed selling and administrative cost per year . . . . . . . $105,000
1. Assume that this company uses absorption costing.
a. Determine its unit product cost.
b. Prepare its income statement for the year under absorption costing.
2. Assume that this company uses variable costing.
a. Determine its unit product cost.
b. Prepare its income statement for the year under variable costing.