Question 3 (25 marks) Absorption and Variable Costing 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 $130 Units in beginning inventory 0 Units produced 6,400 Units sold 6,100 Units in ending inventory ? 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 Required: Under variable costing, identify the unit product cost for the month. (5 marks) What is the unit product cost for the month under absorption costing? (5 marks) Prepare an income statement for the month using the contribution format and the variable costing method. (15 marks) Variable Costing Income Statement Sales Variable expenses: Variable cost of goods sold: Beginning inventory Add: Variable manufacturing costs Goods available for sale Less: Ending inventory Variable cost of goods sold Variable selling expense Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Operating income