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Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials Variable manufacturing overhead Fixed manufacturing overhead costs (total) Selling and administrative costs: Variable Fixed (total) $ 192 $ 13 $438,840 10% of sales $333,900 Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $489 each. During the first month of operations, the following activity was recorded: Units produced Units sold 4,770 3,550 Required: 1. Compute the unit product cost under each of the following costing method. Unit Product Cost 297 Absorption costing Variable costing 205 2. Prepare an income statement for the month using absorption costing. (Do not leave any empty spaces; input a O wherever it is required.) Sales $ 1,735,950 Cost of goods sold: Beginning inventory Add: Cost of goods manufactured 1,054,350 X Goods available for sale 1,054,350 Less: Ending inventory 362,340 692,010 Gross margin 1,043,940 Selling and administrative expenses 507,495 Operaing income $ 536,445 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 3. Prepare a contribution format income statement for the month using variable costing. (Do not leave any empty spaces; input a O wherever it is required.) Sales $ 1,735,950 Variable expenses: Variable cost of goods sold: Beginning inventory $ Add: Variable manufacturing costs 727,750 X Goods available for sale 727,750 Less: Ending inventory 250,100 Variable cost of goods sold 477,650 Variable selling and administrative 173,595 651,245 expense Contribution margin 1,084,705 Fixed expenses: Fixed manufacturing overhead 438,840 Fixed selling and administrative expense 772,740 Operating income $ 311,965 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 333,99 5. Reconcile the absorption costing and variable costing operating income figures in (2) and (3) above. Variable costing operating income (loss) $ 311,965 Add: Fixed manufacturing overhead cost deferred in inventory under absorption 124 X costing Absorption costing operating income (loss) $ 312,089 *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted

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