Question

Softwood Limited, which has only one product, has provided the following data concerning its operations for September:

Selling prices	$84
Units in beginning inventory	500
Units produced	1,900
Units sold	2,100
Units in ending inventory	300
Variable costs per unit:
Direct materials	$25
Direct labour	$10
Variable manufacturing overhead	$7
Variable selling and administrative	$10
Fixed costs:
Fixed manufacturing overhead	$38,000
Fixed selling and administrative	$21,000

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:

i. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.

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

iii. For the past 5 years, Shirin Nadia has been working as a Management Accountant at Meridian Energy – a leading power company based in New Zealand. However, she has recently seen a job advertisement for a Senior Management Accountant at Auckland Museum. Shirin applied for the position and subsequently progressed towards the final interview stage. While she was going through the final interview process, an interview panel member asked her how the performance report of the Auckland Museum would be different from Meridian Energy (i.e., her current employer). Imagine yourself as Shirin and write down your response to the panel member’s question.[Maximum word limit: 240 words].

Answer 1