Cool Sky reports the following for its first year of operations. The company produced 42,000 units and sold 34,000 units at a price of $150 per unit.

 Cool Sky reports the following for its first year of operations. The company produced 42,000 units and sold 34,000 units at a price of $150 per unit.
 
Direct materials     $ 66     per unit
Direct labor     $ 25     per unit
Variable overhead     $ 9     per unit
Fixed overhead     $ 546,000     per year
Variable selling and administrative expenses     $ 11     per unit
Fixed selling and administrative expenses     $ 115,000     per year
Exercise 6-3 (Algo) Part 1a

1a. Assume the company uses absorption costing. Determine its total product cost per unit.

Explanation

Fixed overhead ($546,000 / 42,000 units produced) = $13 per unit

1b. Assume the company uses absorption costing. Prepare its income statement for the year under absorption costing.

Explanation

Sales (34,000 units × $150 per unit) = $5,100,000
Cost of goods sold (34,000 units × $113 per unit) = $3,842,000

2a. Assume the company uses variable costing. Determine its total product cost per unit.

2b. Assume the company uses variable costing. Prepare its income statement for the year under variable costing.