PROBLEM 5-15 Comprehensive Problem with Labor Fixed [LO1, LO2, LO3, LO4] Far North Telecom, Ltd., of Ontario, has organized a new division to manufacture and sell specialty cellular telephones. The division's monthly costs are shown below: Manufacturing costo Variable coste per unit: Direct materials Variable manufacturing overhead S48 S2 $360,000 Fixed manufacturing overhead costs (total) Selling and administrative costs: 12% of sales $470,000 Variable Fixed (total) Far North Telecom 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 cellular phones sell for $150 each. During September, the first month of operations, the following activity was recorded Required: 1. Compute the unit product cost under: a. Absorption costing b. Variable costing Prepare an absorption costing income statement for September Prepare a contribution format income statement for September using variable costing Assume that the company must obtain additional financing in order to continue operations. As a mem ber of top management, would you prefer to rely on the statement in (2) above or in (3) above when meeting with a group of prospective investors? Reconcile the absorption costing and variable costing net operating incomes in (2) and (3) above. 2. 3. 4. 5