direct material................................................$28

direct labor.....................................................$16

variable manufacturing overhead....................$3

Fixed manufacturing overhead.....................$840,000

Variable selling and administration ..................$4

Fixed selling and administrative ....................$480,000

Per unit selling price.........................................$80.

Units produced................................................40,000

Units sold.........................................................35,000

1. What is the unit product cost under variable costing?

2. What is the unit product cost under absorption costing?

3. What is the companys total contribution margin under variable costing?

4. What is the companys net operating income under variable costing?

5. What is the companys total gross margin under absorption costing?

6. What is the companys net operating income under absorption costing?

7. What is the amount of the difference between the variable costing and absorption costing net operating incomes? What is the cause of this difference?

8. What is the companys break-even point in sales? Is it above or below the actual sales volume? Compare the break-even sales volume to your answer for question 6 and comment.

9. What would have been the companys variable costing net operating income if it had produced and sold 35,000 units?

10.If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2? Why?

11.Prepare a contribution format segmented income state that includes a total column and columns for the East and West regions.