Exercise $8-7$ Variable and Absorption Costing Unit Product Costs; Income Statements $[$LO$1,$ LO$2]$

Baxtell Company manufactures and sells a single product. The following costs were incurred during the company$$s first year of operations:

Variable costs per unit:

Manufacturing:

Direct materials $ $25$

Direct labour $12$

Variable manufacturing overhead $3$

Variable selling and administrative $5$

Fixed costs per year:

Fixed manufacturing overhead $200,000$

Fixed selling and administrative expense $110,000$

During the year, the company produced $25,000$ units and sold $21,000$ units. The selling price of the company$$s product is $$65$ per unit.

Required:

$1.$ Assume that the company uses absorption costing.

a$.$ Compute the unit product cost.

b$.$ Prepare an income statement for the year. $($Do not leave any empty spaces; input a $0$ wherever it is required.$)$

$2.$ Assume that the company uses variable costing.

a$.$ Compute the unit product cost.

b$.$ Prepare an income statement for the year. $($Do not leave any empty spaces; input a $0$ wherever it is required.$)$

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