The EG Company Produces and Sells One Product: a Microwave

question 18

Essay

The EG Company produces and sells one product: a microwave oven.The following data refer to the year just completed:
$\begin{array}{|l|r|}\hline \text { Beginning inventory } & \$ 0 \\\hline \text { Units produced } & 25,000 \\\hline \text { Units sold } & 20,000 \\\hline \text { Sales price per unit } & \$ 400 \\\hline \text { Selling and administrative expenses: } & \\\hline \text { Variable per unit } & \$ 15 \\\hline \text { Fixed (total) } & \$ 275,000\\\hline \text { Manufacturing costs: } & \\\hline \text { Direct materials cost per unit } & \$ 200 \\\hline \text { Direct labour cost per unit } & \$ 50 \\\hline \text { Variable overhead cost per unit } & \$ 30 \\\hline \text { Fixed overhead (total) } & \$ 300,000\\\hline\end{array}$

Assume that direct labour is a variable cost.
Required:
a)Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.
b)Prepare an income statement for the year using absorption costing.
c)Prepare an income statement for the year using variable costing.
d)Reconcile the absorption costing and variable costing operating income figures in b)and c)above.

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Definitions:

Development Stages

Phases of growth that individuals pass through from infancy to adulthood, characterized by psychological and physical changes.

Generativity

A concern for establishing and guiding the next generation, typically expressed through parenting, teaching, and community involvement.

Industry

The sector of the economy concerned with production, manufacturing, and distribution of goods and services.

Initiative

The ability to assess and begin tasks independently without needing external motivation or pressure.