The Good Buy Company produces a single product. The cost characteristics of the product and of the manufacturing plant are given below:
Number of units produced each year......6,000
Variable costs per unit:
Direct materials ............... $2
Direct labor ............... $4
Variable manufacturing overhead ........ $1
Variable selling & administrative expense .... $3
Fixed costs per unit:
Manufacturing overhead.........$30,000
Selling & administrative expense..........$10,000
Under the variable costing method
(1) Compute the cost of a unit of product
(2) Prepare a variable costing income statement if 5,000 units are sold at a price of $20.
Assume beginning inventory is equal to zero (0).