Reference no: EM133146770

Question - Absorption/Variable Costing - Curious George, Ltd is a small manufacturing firm that produces yellow hats. The hats sell for $155 each. The cost functions for its manufacturing and S & A costs are as follows:

Manufacturing Costs = $21.30 per unit + $675,000 per month

S & A Costs = $11.45 per unit + $385,000 per month

At the beginning of January, the firm had 3,500 units in inventory. Under absorption costing, the amount recorded for the carrying value of the inventory would have been $337,050 (the firm uses a FIFO inventory system). During January, 15,000 units were produced and 16,500 were sold.

Required -

1. What would the cost of the inventory on January 1 have been assuming variable costing?

2. What was the unit cost under absorption costing for December?

3. How many units were produced in December?

4. What is the unit cost under variable costing for January?

5. What is variable cost per unit for January?

6. Prepare a traditional format income statement for January assuming absorption costing.

7. Prepare a contribution format income statement for January assuming variable costing.