Thyme2Cook manufactures garden planters for growing fresh herbs to use in cooking. Individuals as well as local restaurants purchase the planters. Recently, the company incurred the following costs:

Thyme2Cook charges \($17\) for each planter that it sells. During the first month of operation, it made 6,500 planters and sold 6,225.

Required:

1. Assuming Thyme2Cook uses variable costing, calculate the variable manufacturing cost per unit for last month.

2. Prepare a variable costing income statement for last month.

3. Assuming Thyme2Cook uses full absorption costing, calculate the full manufacturing cost per unit for last month.

4. Prepare a full absorption costing income statement.

5. Compare the two income statements and explain any differences.

6. Suppose next month Thyme2Cook expects to produce 6,000 planters and sell 5,475 of them. Without any calculations, explain whether variable or absorption costing will show a higher profit.

Transcribed Image Text:

Variable Cost per Planter Direct materials Direct labor Variable manufacturing overhead Variable selling & administrative expenses Fixed Cost per Month $ 5.60 3.20 1.55 0.65 Fixed manufacturing overhead $12,125 Fixed selling and administrative expenses 8,640