Answer:
Results are below.
Explanation:
<u>The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead</u>.
Unitary product cost= 17 + 7 + 3 + (893,000 / 47,000)
Unitary product cost= 27 + 19
Unitary product cost= $46
<u>Now the income statement:</u>
Sales= 42,000*84= 3,528,000
COGS= (42,000*46)= (1,932,000)
Gross profit= 1,596,000
Total Selling and administrative expenses= (42,000*4) + 560,000= (728,000)
Net operating profit= 868,000
<u>The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).</u>
Unitary variable product cost= 17 + 7 + 3
Unitary variable product cost= $27
<u>Now, the income statement:</u>
Sales= 3,528,000
Total variable cost= 42,000*(27 + 4)= (1,302,000)
Total contribution margin= 2,226,000
Total fixed manufacturing cost= (893,000)
Total Selling and administrative expenses= (560,000)
Net operating profit= 773,000
