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Question - Maxwell Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing: Direct materials $18 Direct labor $7 Variable manufacturing overhead $2 Variable selling and administrative $2 Fixed costs per year:
Fixed manufacturing overhead $200,000
Fixed selling and administrative expenses $110,000
During the year, the company produced 20,000 units and sold 16,000 units. The selling price of the company's product is $50 per unit.
Required -
1. Assume that the company uses absorption costing: a. Compute the unit product cost. b. Prepare an income statement for the year.
2. Assume that the company uses variable costing: a. Compute the unit product cost. b. Prepare an income statement for the year.
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