Alta Products Ltd. has just created a new division to manufacture and sell DVD players. The facility is highly automated and thus has high monthly fixed costs, as shown in the following schedule of budgeted monthly costs. This schedule was prepared based on an expected monthly production volume of 2,000 units.

Instructions
(a) Prepare an income statement for the month ended August 31, 2016, under absorption costing.
(b) Prepare an income statement for the month ended August 31, 2016, under variable costing.
(c) Reconcile the absorption-costing and variable-costing income figures for the month.
(d) Prepare an income statement for the month ended August 31, 2016, under throughput costing.
(e) Reconcile the variable-costing income and through put-costing income figures for the month.
(f) What are some of the arguments in favour of using variable costing? What are some of the arguments in favour of using absorption costing?

Manufacturing costs Variable costs per unit Direct materials Direct labour Variable overhead Total fixed overhead 40 10 70,000 Selling and administrative costs Variable Fixed 6% of sales $50,000 During August 2016, the following activity was recorded: Units produced Units sold Selling price per unit 2,000 1,700 $ 175