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Dance Creations manufactures authentic Hawaiian hula skirts that are purchased for traditional Hawaian celebrations, costume parties, and other functions. During its first year of business, the company incurred the following costs:

Variable Cost per Hula Skirt

Direct materials

Direct labor

$$9\mathrm{.}75$

Variable manufacturing overhead

Variable selling and administrative expenses

Fixed Costs per Month

Fixed manufacturing overthead

Fixed selling and administrative expenses

$$16,555$

$5,100$

Dance Creations charges $$31$ for each skirt that it sells. During the first month of operation, it made $1,540$ skirts and sold $1,420.$

Required:

Assuming Dance Creations uses variable costing, calculate the variable manufacturing cost per unit for last month.

Complete a contribution margin income statement for the last month.

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

Complete a full absorption costing income statement.

Suppose next month Dance Creations expects to produce $1,540$ hula skirts and sell $1,640.$ Without recreating the new income statements, calculate the difference in profit between variable costing and full absorption costing. Which would be higher?

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