Reference no: EM132583180

The Frontier Telecom, Ltd. 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 $72

Variable manufacturing overhead $8

Fixed manufacturing overhead costs (total) $362,400

Selling and administrative costs:

Variable 12% of sales

Fixed (total) $476,000

The Frontier 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 ?xed manufacturing overhead. The cellular phones sell for $210 each. During September, the ?rst month of operations, the following activity was recorded:

Units produced 18,000

Units sold 16,000

Required:

Question 1. Compute the unit product cost under:

a. Absorption costing.

b. Variable costing.

Question 2. Prepare an absorption costing income statement for September.

Question 3. Prepare a contribution format income statement for September using variable costing.