Reference no: EM132583206

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 $82

Variable manufacturing overhead $11

Fixed manufacturing overhead costs (total) $363,400

Selling and administrative costs:

Variable 17% of sales

Fixed (total) $478,500

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 $235 each. During September, the ?rst month of operations, the following activity was recorded:

Units produced 20,500

Units sold 18,500

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.