PROBLEM $8-13$

Comprehensive Problem with Labour Fixed $[$ LO$1,$ LO$2,$ LO$3,$ LO$4]$

eXcel

Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The division's monthly costs are shown in the schedule below:

Zurgot 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 labour costs in its fixed

manufacturing overhead. The tables sell for $$400$ each.

During the first month of operations, the following activity was recorded:

Required:

Compute the unit product cost under

a$.$ Absorption costing.

b$.$ Variable costing.

Prepare an income statement for the month using absorption costing.

Prepare a contribution format income statement for the month using variable costing.

bank? Why?

Reconcile the absorption costing and variable costing operating income figures in $(2)$ and $(3)$ above.