Questions -

Q1. If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is the manufacturing cost per unit if:

(a) 20,000 units are manufactured and the company uses the variable costing concept?

(b) 25,000 units are manufactured and the company uses the variable costing concept?

(c) 20,000 units are manufactured and the company uses the absorption costing concept?

(d) 25,000 units are manufactured and the company used the absorption costing concept?

Q2. On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:

Units

Production 50,000

Sales ($18 per unit) 42,000

Inventory, January 31 8,000

Manufacturing costs: 

Variable $575,000

Fixed 80,000

Total $655,000

Selling and administrative expenses: 

Variable $ 35,000

Fixed 10,500

Total $ 45,500

(a) Prepare an income statement using absorption costing.

(b) Prepare an income statement using variable costing.