Problem 1: (20 points) Cinnabar, Inc. has provided the following data for the ye

Question

Problem 1: (20 points) Cinnabar, Inc. has provided the following data for the year irect materials s10 per unit $15 per unit 520 per unit rect labor ariable manufacturing overhead Fixed manufacturing overhead Fixed selling and administrative costs Sales price $25,000 per year 515,000 per year s75 per unit nning Finished Goods Inventory units Units produced 5,000 4,500 units nits sold Assume no beginning inventories. Requirements: a) Compute Cinnabar's unit product cost under absorption costing and variable costing. b) Prepare income statements for Cinnabar using absorption costing and variable costing

Explanation / Answer

a) Unit product cost under variable and absorption costing :

b) Income statement under absorption costing :

Variable costing income statement :

Variable Absorption Direct material 10 10 Direct labour 15 15 Variable manufacturing overhead 20 20 Fixed manufacturing overhead (25000/5000) 5 Unit product cost 45 50

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