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Stark and Company would like to evaluate one of the product lines that they sell to the defense department. Every month the Stark and Company produce an identical number of units, although the sales in units differ from month to month.

Selling price

$105

Units in beginning inventory

110

Units produced

6,400

Units sold

6,100

Units in ending inventory

600

Variable costs per unit:

Direct materials

$62

Direct labour

$48

Variable manufacturing overhead

$3

Variable selling and administrative

$7

Fixed costs:

Fixed manufacturing overhead

$64,000

Fixed selling and administrative

$35,600

Submission Instructions:

1. Under variable costing, identify the unit product cost for the month.

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

3. Prepare an income statement for the month using the contribution format and the variable costing method.

4. Prepare an income statement for the month using the absorption costing method.