Compute the product cost per meal produced

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Question - Gia's Foods produces frozen meals, which it sells for $8 each. The company computes a new monthly fixed manufacturing overhead rate based on the planned number of meals to be produced that month. All costs and production levels are exactly as planned. The following data are from Gia's Foods first month in business.

January 2007

Sales 1,000 meals

Production 1,400 meals

Variable manufacturing cost per meal $4.00

Sales commission cost per meal $1.00

Total fixed manufacturing overhead $700

Total fixed marketing and administrative costs $600

Requirements -

i) Compute the product cost per meal produced under absorption costing and under variable costing.

ii) Prepare the income statement for January 2007 using variable costing.

iii) List three situations in which marginal costing, as a technique, aids decision-making.

Reference no: EM132767005

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