Reference no: EM132917672

Question - Stark, Inc., produces and sells a unique robot antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been reported for the first month of the new plant's operation:

Selling price $108

Beginning inventory 0

Units produced 35,000

Units sold 30,000

Selling price per unit $50

Selling and Admin expenses:

Variable per unit $2

Fixed (total) $360,000

Manufacturing costs:

Direct material cost per unit $9

Direct labour cost per unit $8

Variable overhead cost per unit $3

Fixed overhead cost (Total) $350,000

Management is anxious to see how profitable the new antenna will be and has asked that an income statement be prepared for the month. Assume that direct labour is a variable cost.

Required -

Assuming that the company uses absorption costing, compute the unit product cost and prepare a income statement.

Assuming that the company uses variable costing, compute the unit product cost and prepare a income statement.

Explain the reason for any difference in the ending inventories under the two costing methods and the impact of this difference on reported operating income.