Exercise 3-54

Income Statements under Absorption and Variable Costing

Objective 4In the coming year, Kalling Company expects to sell 28,700 units at $32 each. Kalling's controller provided the following information for the coming year:

Units production	30,000
Unit direct materials	$ 9.95
Unit direct labor	$ 2.75
Unit variable overhead	$ 1.65
Unit fixed overhead	$ 2.50
Unit selling expense (variable)	$ 2.00
Total fixed selling expense	$ 65,500
Total fixed administrative expense	$231,000

Required:

1. Calculate the cost of one unit of product under absorption costing.

2. Calculate the cost of one unit of product under variable costing.

3. Calculate operating income under absorption costing for next year.

4. Calculate operating income under variable costing for next year.