Breedon produces a single product. Data concerning the company’s operations last year appear below:
Units in beginning inventory……………………………………..0
Units produced……………………………………………..12,000
Units Sold…………………………………………………..11,250
Selling price per unit…………………………………………..$90
Variable costs per unit:
Direct materials………………………………………………..$20
Direct labor……………………………………………………$10
Variable manufacturing overhead………………………………$8
Variable selling and administrative……………………………..$5
Fixed costs in total:
Fixed manufacturing overhead………………………….$180,000
Fixed selling and administrative…………………………$150,000
Required:
a. Compute the unit product cost under both absorption and variable costing.
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. Prepare a report reconciling the difference in net operating income between absorption and variable costing for the year.
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