Advance Products, Inc., has just organized a new division to manufacture and sell specially designed bookshelves using s

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Advance Products Inc Has Just Organized A New Division To Manufacture And Sell Specially Designed Bookshelves Using S 1 (74.52 KiB) Viewed 21 times

Advance Products, Inc., has just organized a new division to manufacture and sell specially designed bookshelves using select hardwoods for personal computers. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials .......... $172 Variable manufacturing overhead ............... $8 Fixed manufacturing overhead costs (total)... $240,000 Selling and administrative costs: Variable .... 20% of sales Fixed (total) . $300,000 Advance Products regards all of its workers as full-time employees and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The bookshelf sell for $600 each. During the first month of operations, the following activity was recorded: Units produced ............... 4,000 Units sold ......... 3,000 Required: 1. Compute the unit product cost under: a. Absorption costing. b. Variable costing. 2. Prepare an income statement for the month using absorption costing. 3. Prepare a contribution format income statement for the month using variable costing. 4. Reconcile the absorption costing and variable costing net operating incomes in (2) and (3) above.