Information for Fresh Air Products is given in D8-12.

Instructions
(a) Assume the company uses normal costing and uses the budgeted volume of 13,500 units to allocate the fixed overhead rate rather than the actual production volume of 12,000 units. The company expenses production volume variance to cost of goods sold in the accounting period in which it occurs. Do the following:
1. Calculate the manufacturing cost per unit.
2. Prepare a normal-costing income statement for the first month of operation.
(b) Reconcile the difference in net income between the absorption-costing and normal-costing methods.

Transcribed Image Text:

Beginning inventory Units produced Units sold Manufacturing Costs 0 units 12,000 10,000 Fixed overhead Variable overhead Direct labour Direct material $108,000 $3 per unit $12 per unit $30 per unit Selling and administrative costs ixe $200,000 Variable $4 per unit sold