Question

Nelter Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	115
Units in beginning inventory		385
Units produced		6,450
Units sold		6,230
Units in ending inventory		605
Variable costs per unit:
Direct materials	$	42
Direct labor	$	22
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	19
Fixed costs:
Fixed manufacturing overhead	$	109,650
Fixed selling and administrative expense	$	74,760

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

a. Prepare a contribution format income statement for the month using variable costing.

b. Prepare an income statement for the month using absorption costing.

Answer 1