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Determine the unit product cost under absorption costing

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Reference no: EM132058139

Question - Oliver Inc. produces an oak rocking chair that is designed to ease back problems. The chairs sell for $300 each. The results of last year's operations are as follows:

Units in beginning inventory. 0

Units produced during the year. 25,000

Units sold during the year. 20,000

Units left in ending inventory. 5,000

Variable manufacturing costs per unit.

Direct materials $70

Direct labor 20

Variable manufacturing overhead 15

Variable selling and administrative 10

Total variable cost per unit $115

Fixed costs:

Fixed manufacturing overhead $600,000

Fixed selling and administration 650,000

Total fixed costs $1,250,000

Required:

A) Determine the unit product cost under absorption costing, variable costing, and throughput costing.

B) Prepare an income statement using variable costing.

C) Prepare an income statement using absorption costing.

D) Explain the difference in operating income for the two costing systems.

Reference no: EM132058139

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