Absorption costing and variable costing

Reference no: EM13914810

Bell Company manufactures and sells a single product. Cost data for the product follow:

Variable costs per unit:
Direct materials								$			3
Direct labor											12
Variable factory overhead											3
Variable selling and administrative											3

Total variable costs per unit								$			21

Fixed costs per month:
Fixed manufacturing overhead								$			120,000
Fixed selling and administrative											166,000

Total fixed cost per month								$			286,000


The product sells for $48 per unit. Production and sales data for May and June, the first two months of operations, are as follows:
				Units Produced			Units Sold
May				24,000			20,000
June				24,000			28,000

Income statements prepared by the accounting department, using absorption costing, are presented below:
					May				June
Sales					$	960,000			$	1,344,000
Cost of goods sold						460,000				644,000

Gross margin						500,000				700,000
Selling and administrative expenses						226,000				250,000

Net operating income					$	274,000			$	450,000


Required:
1.			Determine the unit product cost under absorption costing and variable costing.


2.		Prepare contribution format variable costing income statements for May and June.


3.	Reconcile the variable costing and absorption costing net operating incomes. (Loss and deduction

Reference no: EM13914810

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