Review Problem 1: Contrasting Variable and Absorption Costing Dexter Corporation produces and sells a single product, a wooden hand loom for weaving small items such as scarves Selected cost and operating data relating to the product for two years are given below: Selling price per unit. $50 Manufacturing costs: Variable per unit produced: Direct materials. $11 Direct labor .......... Variable manufacturing overhead... Fixed manufacturing overhead per year ........ $120,000 Selling and administrative expenses: Variable per unit sold....... $4 Fixed per year. ...... $70,000 Year 1 Year 2 Units in beginning inventory .... Units produced during the year.. Units sold during the year. ... Units in ending inventory ....... 0 10,000 8,000 2,000 2,000 6,000 8,000 0 Required: 1. Assume the company uses absorption costing. a. Compute the unit product cost in each year. b. Prepare an income statement for each year. Chapter 6 2. Assume the company uses variable costing. a. Compute the unit product cost in each year. b. Prepare an income statement for each year. Reconcile the variable costing and absorption costing net operating incomes. 3