Coverall Inc. produces and sells a unique type of case for astandard-size tablet computer that is guaranteed waterproof butstill allows for regular functionality of the tablet. The companyhas just opened a new plant to manufacture these cases, and thefollowing cost and revenue data have been provided for the firstmonth of the plant’s operation in the form of a worksheet:
Beginning inventory 0
Units produced 20,000
Units sold 15,000
Selling price per unit $ 80
Selling and administrative expenses:
Variable per unit $ 6
Fixed (total) $ 475,000
Manufacturing costs:
Direct materials cost per unit $ 12
Direct labour cost per unit $ 9
Variable manufacturing overhead cost per unit $ 5
Fixed manufacturing overhead cost (total) $ 600,000
Since the new case is unique in design, management is anxiousto see how profitable it will be and has asked that an incomestatement be prepared for the month.
Required:
1. Assume that the company uses absorption costing.
a. Determine the unit product cost.
b. Prepare an income statement for the month. (Do not leaveany empty spaces; input a 0 wherever it is required.)
2. Assume that the company uses variable costing.
a. Determine the unit product cost.
b. Prepare a contribution format income statement for themonth. (Do not leave any empty spaces; input a 0 wherever it isrequired.)
