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Exercise 8-7 Variable and Absorption Costing Unit Product Costs; Income Statements [LO1, LO2]
Baxtell Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations: |
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Variable costs per unit: |
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Manufacturing: |
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Direct materials |
$ |
39 |
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Direct labour |
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21 |
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Variable manufacturing overhead |
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3 |
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Variable selling and administrative |
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6 |
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Fixed costs per year: |
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Fixed manufacturing overhead |
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302,500 |
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Fixed selling and administrative expense |
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177,800 |
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During the year, the company produced 30,250 units and sold 25,400 units. The selling price of the company’s product is $90 per unit. |
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Required: |
1. |
Assume that the company uses absorption costing. |
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a. |
Compute the unit product cost. |
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b. |
Prepare an income statement for the year. |
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2. |
Assume that the company uses variable costing. |
a. |
Compute the unit product cost. |
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b. |
Prepare an income statement for the year. |
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