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Absorption Cost and Variable Cost

Name: ______________________________

Jarbee Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $129

Units in beginning inventory 500
Units produced 3,600
Units sold 3,800
Units in ending inventory 300

Variable costs per unit:
Direct materials $13
Direct labor $59
Variable manufacturing overhead $4
Variable selling and administrative $8

Fixed costs:
Fixed manufacturing overhead $97,200
Fixed selling and administrative $64,600

The company produces the same number of units every month, and the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

1. What is the unit product cost for the month under variable costing?
(show work)

2. What is the unit product cost for the month under absorption costing?
(show work)

3. What is the net operating income for the month under variable costing?

Solution (show work):

4. What is the net operating income for the month under absorption costing?

Solution (show work):

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The solution explains various calculations pertaining to absorption cost and variable cost

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