The Dorset Corporation produces and sells a single product. The following data refer to the...
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Accounting
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:
| Beginning inventory | 0 | |
| Units produced | 28,800 | |
| Units sold | 25,100 | |
| Selling price per unit | $ | 410 |
| Selling and administrative expenses: | ||
| Variable per unit | $ | 20 |
| Fixed per year | $ | 527,100 |
| Manufacturing costs: | ||
| Direct materials cost per unit | $ | 241 |
| Direct labor cost per unit | $ | 56 |
| Variable manufacturing overhead cost per unit | $ | 34 |
| Fixed manufacturing overhead per year | $ | 604,800 |
Assume that direct labor is a variable cost.
Required:
a. Compute the unit product cost under both the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.
d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.
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