Nelson Company,which Has Only One Product,has Provided the Following Data

question 139

Essay

Nelson Company,which has only one product,has provided the following data concerning its most recent month of operations:
$\begin{array}{|l|r|}\hline \text { Selling price } & \$ 84 \\\hline \text { Units in beginning inventory } & 500 \\\hline \text { Units produced } & 1,900 \\\hline \text { Units sold } & 2,100 \\\hline \text { Units in ending inventory } & 300 \\\hline \text { Variable costs per unit: } &\\\hline \text { Direct materials } & \$ 25 \\\hline \text { Direct labour } & \$ 10 \\\hline \text { Variable manufacturing overhead } & \$ 7 \\\hline \text { Variable selling and administrative } & \$ 10 \\\hline \text { Fixed costs: } & \\\hline \text { Fixed manufacturing overhead } &\$ 38,000 \\\hline \text { Fixed selling and administrative } &\$ 21,000\\\hline\end{array}$

The company produces the same number of units every month,although the sales in units vary from month to month.The company's variable costs per unit and total fixed costs have been constant from month to month.
Required:
a)Prepare an income statement for the month using the contribution format and the variable costing method.
b)Prepare an income statement for the month using the absorption costing method.

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