Reference no: EM13567476

Far North Telecom, Ltd., of Ontario, has organized a new division to manufacture and sell specialty cellular telephones. The division's monthly costs are shown below: Manufacturing costs: Variable costs per unit: Direct materials $84 Variable manufacturing overhead $2 Fixed manufacturing overhead costs $250,100 Selling and administrative costs: Variable 14% of sales Fixed (total) $162,000 Far North Telecom 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 cellular phones sell for $270 each. During September, the first month of operations, the following activity was recorded: Units produced 4,100 Units sold 3,300 rev: 02-09-2011 Requirement 1:

(a) Compute the unit product cost under Absorption costing. Unit product cost $ (b) Compute the unit product cost under Variable costing. Unit product cost $ rev: 02-09-2011 check my workeBook Links references Worksheet Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method. Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ. Difficulty: Medium Learning Objective: 06-02 Prepare income statements using both variable and absorption costing. Learning Objective: 06-04 Understand the advantages and disadvantages of both variable and absorption costing. Requirement 2: Prepare an absorption costing income statement for September. $ $ Requirement 3: Prepare a contribution format income statement for September using variable costing.$ Variable expenses: $ Fixed expenses: $ Requirement 4: Assume that the company must obtain additional financing in order to continue operations. As a member of top management, would you prefer to rely on the statement in (2) above or in above when meeting with a group of prospective investors? Absorption costing statement Variable costing statement Requirement 5: Reconcile the absorption costing and variable costing net operating incomes in requirement 2 and 3 above. $ : Fixed manufacturing overhead cost deferred $.