2005 2006 2007

Drones in beginning inventory 0 0 2

Drones produced 10 10 10

Drones sold 10 8 12

Drones in ending inventory 0 2 0

Selling price per drone $400,000

Variable manufacturing cost per drone $240,000

Fixed manufacturing overhead for the year $600,000

Fixed manufacturing overhead per drone $60,000 ($600,000/10)

Variable selling and administrative expense per drone $5,000

Fixed selling and administrative expense $80,000

Required:

1) Compute per unit product cost under full and variable costing

2) Prepare income statement under full and variable costing