Reference no: EM132536185

An Accra based Company manufactures and sells a single product. Current year sales volume is 50,000 units and sells at a price of ¢86.00 per unit. The prime costs amount to ¢28.00 per unit. Variable manufacturing overhead costs are ¢13.00 per unit and fixed manufacturing overhead costs are ¢455,000.00 per year. There are no beginning inventories and 65,000 units are produced during the year. Variable selling, general and administrative expenses are ¢4.50 per unit sold plus fixed selling and administrative expenses of ¢765,000 per year.

Question 1. Calculate the product cost per unit under the absorption and variable costing methods

Question 2. Prepare the income statement for XYZ for the year under the absorption and Variable costing methods showing the operating profits for the year.

Question 3. Explain why there is a difference between the profits under absorption costing and variable costing methods.