ZKB company manufactures a unique device that is used by internet users to boost Wi-Fi signals. The following data relates to the first month of operation:
- Beginning inventory: 0 units
- Units produced: 40,000 units
- Units sold: 35,000 units
- Selling price: $120 per unit
Marketing and administrative expenses:
- Variable marketing and administrative expenses per unit: $4
- Fixed marketing and administrative expenses per month: $1,120,000
- Direct materials cost per unit: $30
- Direct labor cost per unit: $14
- Variable manufacturing overhead cost per unit: $4
- Fixed manufacturing overhead cost per month: $1,280,000
Management is anxious to see the success as well as profitability of newly designed unique booster.
- Calculate unit product cost and prepare income statement under variable costing system and absorption costing system.
- Prepare income statement under two costing system.
- Prepare a schedule to reconcile the net operating income under variable and absorption costing system.
(1) Calculation of unit product cost:
(2) Income statements:
a. Absorption costing: