Taffei Company, which has only one product, has provided the following data conc

Question

Taffei Company, which has only one product, has provided the following data concerning its most recent month of operations:

a. What is the unit product cost for the month under variable costing?

b. What is the unit product cost for the month under absorption costing?
c. Prepare an income statement for the month using the variable costing method.
d. Prepare an income statement for the month using the absorption costing method.

Selling Price $         175 Units in beginning Inventory 0 Units Produced 9500 Units sold 8000 Units in ending Inventory 1500 Variable Costs per unit: Direct materials $           55 Direct labor $           38 Variable manufacturing overhead $             2 Variable selling and admin $             10 Fixed Costs: Fixed manufacturing overhead $ 300,000 Fixed selling and admin $     125,000

Explanation / Answer

a. unit product cost for the month under variable costing = 55+38+2+10 = $105 b. unit product cost for the month under absorption costing = 105 + 425,000/9500 = $149.75 c. Revenues : $175*8000 = $1,400,000 Expenses : Variable Costs per unit: Direct materials $55*9500 = $522,500 Direct labor $38*9500 = $361,000 Variable manufacturing overhead $2*9500 = $19,000 Variable selling and admin $10*9500 = $95,000 Total Expenses = $997,500 Net income = $402,500 d. Revenues : $175*8000 = $1,400,000 Expenses : Variable Costs per unit: Direct materials $55*9500 = $522,500 Direct labor $38*9500 = $361,000 Variable manufacturing overhead $2*9500 = $19,000 Variable selling and admin $10*9500 = $95,000 Fixed Costs: Fixed manufacturing overhead $ 300,000 Fixed selling and admin $125,000 Total Expenses = $1,402,500 Net income = -$2,500

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