<u>Solution and Explanation:</u>
1. assuming the firm using the varibale costing
Calculation of unit cost under variable costing
Direct material = 49
Direct labor = 53
Variable manufacturing overhead = 8
UNIT PRODUCT COST = 110
2. Assuming company using absorption costing
Calculation of unit cost under absorption costing
Direct material = 49
Direct labor = 53
Variable manufacturing overhead = 8
Fixed manufacturing overhead ( 113250 divide 3440) = 33
UNIT PRODUCT COST = 143
Variable costing income statement
Sales 594660
Less: variable expense
variable COGS 349800
Variable seeling expense 60420
Total variable expense 410220
Total contribution margin 184440
Less: fixed expense
Fixed manufacturing overhead 113520
Fixed selling and admin exp 9540
Total fixd expense 123060
Net opertaing income (Loss) 61380
Income statement under absorption costing
Sales 594660
COGS 454740
Gross margin 139920
Selling and admin expense
Variable = 60420
Fixed = 9540
net operating income 69960
recncociliation of varibale costing and absorption costing net operating income
Variable costing net operating income 61380
Add: Fixd manufacturing overheads defered in inventory under absorption costing 8580
Absorption costing Net operating income (Loss) 69960
