Question

Advance Products, Inc., has just organized a new division tomanufacture and sell specially designed tables using selecthardwoods for personal computers. The division’s monthly costs areshown in the schedule below:

Manufacturingcosts:
Variablecosts per unit:
Direct materials		$86
Variable manufacturingoverhead		$6
Fixedmanufacturing overhead costs (total)		$254,200
Selling andadministrative costs:
Variable		13	% of sales
Fixed(total)		$161,000

Advance Products regards all ofits workers as full-time employees and the company has along-standing no-layoff policy. Furthermore, production is highlyautomated. Accordingly, the company includes its labor costs in itsfixed manufacturing overhead. The tables sell for $260 each.

During the first month ofoperations, the following activity was recorded:

Units produced	4,100
Units sold	3,300

Required:

1.	Compute the unit product costunder absorption costing and variable costing.

		Unit ProductCost
a.	Absorption costing
b.	Variable costing

2.	Prepare an income statement for the month using absorptioncosting. (Input all amounts as positive values exceptlosses which should be indicated by a minus sign. Omit the "$" signin your response.)

Absorption Costing Income Statement
(Click toselect)Gross marginCost of goods soldSalesNet operating income(loss)Selling and administrative expenses	$
(Click toselect)Gross marginCost of goods soldSelling and administrativeexpensesNet operating income (loss)Sales
(Click toselect)SalesSelling and administrative expensesNet operating income(loss)Gross marginCost of goods sold
(Click toselect)Selling and administrative expensesNet operating income(loss)SalesCost of goods soldGross margin
(Click toselect)SalesGross marginSelling and administrative expensesCost ofgoods soldNet operating income (loss)	$

3.	Prepare a contribution format income statement for the monthusing variable costing. (Input all amounts as positivevalues except losses which should be indicated by a minus sign.Omit the "$" sign in your response.)

Variable Costing Income Statement
(Click toselect)Fixed manufacturing overheadVariable cost of goods soldFixedselling and administrative expensesContribution marginNet operatingincome (loss)Variable selling and administrative expensesSales		$
Variableexpenses:
(Click toselect)Contribution marginNet operating income (loss)Fixedmanufacturing overheadVariable selling and administrativeexpensesVariable cost of goods soldFixed selling and administrativeexpensesSales	$
(Click to select)Variablecost of goods soldVariable selling and administrative expensesFixedselling and administrative expensesSalesNet operating income(loss)Fixed manufacturing overheadContribution margin
(Click toselect)Contribution marginVariable selling and administrativeexpensesVariable cost of goods soldNet operating income(loss)SalesFixed manufacturing overheadFixed selling andadministrative expenses
Fixed expenses:
(Click toselect)SalesFixed selling and administrative expensesVariable costof goods soldFixed manufacturing overheadNet operating income(loss)Variable selling and administrative expensesContributionmargin
(Click toselect)SalesContribution marginFixed manufacturing overheadNetoperating income (loss)Variable cost of goods soldFixed selling andadministrative expensesVariable selling and administrativeexpenses
(Click toselect)Variable cost of goods soldNet operating income (loss)Fixedselling and administrative expensesVariable selling andadministrative expensesFixed manufacturingoverheadSalesContribution margin		$

5.	Reconcile the absorption costing and variable costing netoperating incomes in (2) and (3) above. (Loss amountsand amounts to be deducted shouldbe indicated with a minus sign. Omit the "$" sign in yourresponse.)

Reconciliation of Variable Costing and Absorption Costing NetOperating Incomes
Variable costing netoperating income (loss)	$
Add (deduct) fixedmanufacturing overhead cost deferred in (released from) inventory under absorption costing
Absorption costingnet operating income (loss)	$