Goran Grill Company makes a single product - a handmade specialty barbeque grill that sells for $600. Data for last year’s operations follow:
Unitsin beginninginventory 0
Unitsproduced 50,000
Units sold 40,000
Variable costs per unit:
Directmaterials $ 150
Directlabor 120
Variable manufacturingoverhead 100
Variable selling and administrative 30
Total variable cost perunit $ 400
Fixed costs:
Fixed manufacturingoverhead $1,500,000
Fixed selling andadministrative 600,000
Total fixedcosts $2,100,000
Required:
- Compute the unit product cost for one barbequegrill for absorption costing and variable costing.
- Prepare an income statement for the year usingthe absorption costing approach.
- Prepare an income statement for the year usingthe variable costing approach.
- Explain the difference in operating income forthe absorption and variable costing approaches.
