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Absorption and Variable Costing

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Maher 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 0
Units produced 3,700
Units sold 3,600
Units in ending inventory 100

Variable costs per unit:
Direct materials $37
Direct labor 38
Variable manufacturing overhead 6
Variable selling and administrative 5

Fixed costs:
Fixed manufacturing overhead $103,600
Fixed selling and administrative 50,400

Required:

a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare an income statement for the month using the contribution format and the variable costing method.
d. Prepare an income statement for the month using the absorption costing method.
e. Reconcile the variable costing and absorption costing net operating incomes for the month.

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Solution Summary

The solution explains the calculations under absorption and variable costing methods

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