Exercise 8-7 variable and absorption costing unit product costs;

Exercise 8-7 Variable and Absorption Costing Unit Product Costs; Income Statements [LO1, LO2]

Baxtell Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:





  Variable costs per unit:










       Direct materials





       Direct labour





       Variable manufacturing overhead





     Variable selling and administrative





  Fixed costs per year:





       Fixed manufacturing overhead





       Fixed selling and administrative expense






      During the year, the company produced 30,250 units and sold 25,400 units. The selling price of the company’s product is $90 per unit.




Assume that the company uses absorption costing.




Compute the unit product cost.







Prepare an income statement for the year.





Assume that the company uses variable costing.



Compute the unit product cost.






Prepare an income statement for the year.

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