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3. Variable and Absorption Costing Follow the directions below and answer the following problem. Maxwell Company...

3. Variable and Absorption Costing

Follow the directions below and answer the following problem.

Maxwell Company manufactures and sells a single product. The following costs were incurred during 2014, the company’s first year of operations:

Variable Costs per Unit:

Production:

Direct Materials $16

Direct Labor 8

Variable Manufacturing Overhead 2

Selling and Administrative 4

Fixed Costs per Year:

Manufacturing Overhead $ 140,000

Selling and Administrative 110,000

During 2014, the company produced 20,000 units and sold 18,000 units. The selling price of the company’s product is $50 per unit.


Required: 1. Assume that the company uses the absorption costing method:

a. Compute the cost to produce one unit of product.

b. Prepare an income statement for 2014.



2. Assume that the company uses the variable or direct costing method:

a. Compute the cost to produce one unit of product.

b. Prepare an income statement for 2014.



For Question A for both 1 & 2 answer below:

Compute the Cost to Produce One Unit of Product

1. Absorption Costing 2. Variable Costing

1B. Income Statement – Absorption Costing

2B. Income Statement – Variable Costing

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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