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Margarita's Foods produces frozen meals that it sells for $9 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Margarita's Foods's first month in business:

Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. (Round your answers to the nearest cent.)

January 2018 Units produced and sold: Sales 950 meals 1,150 meals Production Variable manufacturing cost per meal Sales commission cost per meal Total fixed manufacturing overhead Total fixed selling and administrative costs 4 690 800 January 2018 Absorption Variable costing costing Total product cost per meal Requirement 2a. Prepare Margarita's Foods's January income statement using absorption costing. Margarita's Foods Income Statement (Absorption Costing) Month Ended January 31, 2018 Operating Income Requirement 2b. Prepare Margarita's Foods's January income statement using variable costing Margarita's Foods Income Statement (Variable Costing) Month Ended January 31, 2018 Operating Income Requirement 3. Is operating income higher under absorption costing or variable costing in January? In January, absorption costing operating income variable costing operating income

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