Answer:
Absorption Manufacturing Costs Per Unit $ 102
Absorption Net Income 771,000
Variable Product Costs per unit = $ 90
Variable Net Income 771,000
Explanation:
The difference between the absorption and variable costing is that fixed overheads are included in the product costs of absorption and they are excluded from the product costs of variable costing.
<u>Cool Sky</u>
<u>Product Cost Per unit</u>
<u>Absorption Costing</u>
Manufacturing costs
Direct materials per unit 44,000 *$60 = $ 2640,000
Direct labor per unit 44,000 *$22 = 968,000
Variable overhead 44,000 * 8= $ 352,000
Fixed overhead $528,000
Total Manufacturing Costs = $ 4488000
Manufacturing Costs Per Unit = $ 4488000/ 44,000= $ 102
<u>Cool Sky</u>
<u>Income Statement for the year </u>
<u>Absorption Costing</u>
Sales 36,000 *$140 = 5040000
Manufacturing costs
Direct materials per unit 36,000 *$60 = $ 2160000
Direct labor per unit 36,000 *$22 = 792000
Variable overhead 36,000 * 8= $ 288000
Fixed overhead $528,000
Gross Profit 1272000
Selling and administrative cost
Variable selling and administrative 36,000 * 11= 396000
Fixed selling and administrative $105,000
Net Income 771,000
<u>Cool Sky</u>
<u>Product Cost Per unit</u>
<u>Variable Costing</u>
Manufacturing costs
Direct materials per unit $60
Direct labor per unit $22
Variable overhead per unit 8
Variable Product Costs per unit = $ 90
<u>Cool Sky</u>
<u>Income Statement for the year </u>
<u>Variable Costing</u>
Sales 36,000 *$140 = 5040,000
Manufacturing costs
Direct materials per unit 36,000 *$60 = $ 2160,000
Direct labor per unit 36,000 *$22 = 792,000
Variable overhead 36,000 * 8= $ 288,000
Variable selling and administrative 36,000 * 11= 396,000
Contribution Margin 1404,000
Less Fixed Costs
Fixed overhead $528,000
Fixed selling and administrative $105,000
Net Income 771,000
