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

VARIABLE COSTS PER UNIT:

Manufacturing:

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $18

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7

Variable manufacturing overhead . . . . . . . . . . . . . $2

Variable selling and administrative . . . . . . . . . . . . . . $5

Fixed costs per year:

Fixed manufacturing overhead . . . . . . . . . . . . . . . . . $160,000

Fixed selling and administrative expenses . . . . . . . . $110,000

During the year, the company produced 20,000 units and sold 16,000 units. The selling price of the company’s product is $50 per unit.

Required:

1. Assume that the company uses absorption costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.

2. Assume that the company uses variable costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.