Michonne Company, which has only one product, has provided the following data concerning its most

recent
month of operations: Selling price $155, Units in beginning inventory 100, Units produced 4,500, Units sold
4,300, Units in ending inventory 300. Variable costs per unit: Direct materials $28, Direct labor $49, Variable
manufacturing overhead $7, Variable selling and administrative $7. Fixed costs: Fixed manufacturing overhead
$175,500, Fixed selling and administrative $81,700. 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) What is the unit product cost for the month under variable costing? b) Prepare an income statement for the
month using the contribution format and the variable costing method. c) Without preparing an income
statement, determine the absorption costing net operating income for the month.
a) unit product cost for the month under variable costing
= (Variable manufacturing overhead)+ (Direct Materials)+(Direct Labor)
=($7)+($28)+($49)= $84
b) income statement for the month using the contribution format and the variable costing method
Michonne Company
Income Statement (variable)
For Month Ended

Sales (4300*$155) $666,500

Variable Costs:
Cost of goods sold (4300 x $84 per unit) 361,200
Selling expenses (4300 x $7 per unit) 30,100
Total variable costs $(3,91,300)

Contribution Margin $275,200

Fixed Costs:
Fixed Manufacturing overhead $175,500
Selling & Administrative expenses $81,700
Total Fixed expenses $(257,200)
Net operating income $18,000

C) absorption costing net operating income for the month:

Fixed manufacturing overhead per unit = ($175,500/4500 units) = $39
Variable costing net operating income $18,000
Fixed overhead deferred in inventory ($39*300 units) = $11,700
Net operating income = $29,700

ACT 202.18 MEHEDI HASAN POLASH |1620850030