Required: 1. Compute the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare an income statement for the month using absorption costing.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Cost and Management Accounting
Individual Assignment 2
Question 1
Advance Products, Inc., has just organized a new division to manufacture and sell specially
designed bookshelves using select hardwoods for personal computers. The division's monthly
costs are shown in the schedule below:
Manufacturing costs:
Variable costs per unit:
Direct materials .
$172
$8
Variable manufacturing overhead
Fixed manufacturing overhead costs (total).. $240,000
Selling and administrative costs:
Variable.
Fixed (total) .
20% of sales
$300,000
Advance Products regards all of its workers as full-time employees and the company has a
long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the
company includes its labor costs in its fixed manufacturing overhead. The bookshelf sell for
$600 each.
During the first month of operations, the following activity was recorded:
Units produced .
Units sold
. 4,000
3,000
Required:
1. Compute the unit product cost under:
a. Absorption costing.
b. Variable costing.
2. Prepare an income statement for the month using absorption costing.
3. Prepare a contribution format income statement for the month using variable costing.
4. Reconcile the absorption costing and variable costing net operating incomes in (2) and (3)
above.
Transcribed Image Text:Cost and Management Accounting Individual Assignment 2 Question 1 Advance Products, Inc., has just organized a new division to manufacture and sell specially designed bookshelves using select hardwoods for personal computers. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials . $172 $8 Variable manufacturing overhead Fixed manufacturing overhead costs (total).. $240,000 Selling and administrative costs: Variable. Fixed (total) . 20% of sales $300,000 Advance Products regards all of its workers as full-time employees and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The bookshelf sell for $600 each. During the first month of operations, the following activity was recorded: Units produced . Units sold . 4,000 3,000 Required: 1. Compute the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare an income statement for the month using absorption costing. 3. Prepare a contribution format income statement for the month using variable costing. 4. Reconcile the absorption costing and variable costing net operating incomes in (2) and (3) above.
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