Answer:
The full question is <em>"Exercise 6-15 Absorption Costing Unit Product Cost and Income Statement [LO6-1, LO6-2] Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $210. Data for last year’s operations follow: Units in beginning inventory 0 Units produced 20,000 Units sold 19,000 Units in ending inventory 1,000 Variable costs per unit: Direct materials $50 Direct labor $80 Variable manufacturing overhead $20 Variable selling and administrative $10 Total variable cost per unit $160 Fixed costs: Fixed manufacturing overhead $700,000 Fixed selling and administrative $285,000 Total fixed costs $985,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses absorption costing. Prepare an income statement."</em>
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1. Using absorption costing to compute the unit product cost for one barbecue grill
Particulars Amount
Direct material $50
Direct labor $80
Variable manufacturing overhead $20
Fixed manufacturing overhead <u>$35 </u> ($700000/20000)
Unit product cost <u>$185</u>
2. Assume that the company uses absorption costing. Prepare an income statement.
Particulars Amount
Sales (19000*210) $3,990,000
Less: Cost of goods sold (19000*185) <u>($3,515,000)</u>
Gross margin $475,000
Less: Selling and administrative expense <u>($475,000)</u> (19000*10+285000)
Net operating income $0