Also : 18. Reconcile the absorption costing and variable costing net operating incomes in (2) and (3) above.

Product E. Advance Products, Inc., has just organized a new division to manufacture and sell specially designed tables using select hardwoods for personal computers. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials. $86 Variable manufacturing overhead $4 Fixed manufacturing overhead costs (total).. $240,000 Selling and administrative costs: Variable .. 15% of sales Fixed (total) $160,000 Advance Products regards all of its workers as full-time employees and the company has a long- standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labor costs in its fixed manufacturing overhead. The tables sell for $250 each. During the first month of operations, the following activity was recorded: Units produced..... 4,000 Units sold... 3,200 Required: 14. Compute the unit product cost under: a. Absorption costing. b. Variable costing. 15. Prepare an income statement for the month using absorption costing. 16. Prepare a contribution format income statement for the month using variable costing. 17. Assume that the company must obtain additional financing. As a member of top management, which of the statements that you have prepared in (2) and (3) above would you prefer to take with you to negotiate with the bank? Why