Maxwell Company manufactures and sells a single product. The following costs wer
ID: 2427539 • Letter: M
Question
Maxwell Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations Variable costs per unit Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 11 $5 $2 $ 2 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $ 350,000 S 260,000 During the year, the company produced 35,000 units and sold 25,000 units. The selling price of the company's product is $46 per unit Required 1. Assume that the company uses absorption costing a. Compute the unit product cost Unit product cost b. Prepare an income statement for the year Absorption Costing Income StatementExplanation / Answer
Answer
1) a) Absorption Costing
Unit product cost = $28 Per unit
b)
2)
a) Variable costing
Unit product cost = $18 Per unit
b)
3.a) No
3.b) Yes
3.c) Decrease by $2000
Sales 1,150,000.00 Cost of good sold 700,000.00 Gross Margin 450,000.00 Selling & Administrative expenses 310,000.00 Net Operating income 140,000.00