Answer:
Part a. What is the unit product cost for the month under variable costing?
Direct Materials 200
Direct Labor 50
Variable Manufacturing Overhead 30
Unit product cost 280
Therefore Unit Product cost is $280
Part b. What is the unit product cost for the month under absorption costing?
Direct Materials 200
Direct Labor 50
Variable Manufacturing Overhead 30
Fixed Manufacturing Overheads(300,000/25000) 12
Unit product cost 292
Therefore Unit Product cost is $292
Part c. Prepare a contribution format income statement for the year using variable costing.
Sales (20,000× $400) 8,000,000
Less Cost of Sales ( 5,600,000)
Opening Stock 0
Add Cost of Goods Manufactured (25,000× $280) 7,000,000
Less Closing Stock (5,000×$280) ( 1,400,000)
Contribution 2,400,000
<u>Less Expenses:</u>
Fixed Manufacturing Costs 300,000
Variable Selling and Administrative Expenses (20,000×$15) 300,000
Fixed Selling and Administrative Expenses 275,000
Net Income 1,525,000
Part d. Prepare an income statement for the year using absorption costing.
Sales (20,000× $400) 8,000,000
Less Cost of Sales ( 5,840,000)
Opening Stock 0
Add Cost of Goods Manufactured (25,000× $292) 7,300,000
Less Closing Stock (5,000×$292) ( 1,460,000)
Gross Profit 2,160,000
<u>Less Expenses:</u>
Variable Selling and Administrative Expenses (20,000×$15) 300,000
Fixed Selling and Administrative Expenses 275,000
Net Income 1,585,000
Explanation:
Part a. What is the unit product cost for the month under variable costing?
Only Variable Manufacturing Costs are included as Product Cost
Part b. What is the unit product cost for the month under absorption costing?
Both Variable Manufacturing Costs and Fixed Manufacturing Costs are included as Product Cost
Part c. Prepare a contribution format income statement for the year using variable costing.
Fixed Manufacturing Costs and Non-Manufacturing Costs are treated as Period Costs
Part d. Prepare an income statement for the year using absorption costing.
Only Non-Manufacturing Costs are treated as Period Costs
