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a. Unit product cost under variable costing

Product cost under variable costing Unit cost Amount ($)

Direct materials 15.000 45.000

Direct labor 50.000 150.000

Variable manufacturing overhead 8.000 24.000

Variable selling and admin 12.000 36.000

Total cost 85.000 255.000

b. unit costing under absorption costing

Manufacturing overhead per unit = total overheads /

production units $25/unit

Product cost under absorption costing Unit cost Amount ($)Direct materials 15.000 45.000

Direct labor 50.000 150.000

Variable manufacturing overhead 8.000 24.000

Fixed manufacturing overhead 25.000 75.000

Total cost 98.000 294.000

c. Income statement using variable costing method

Amount ($)

Sales ($125*3,500) 125.000 437.500

Direct materials 15.000 45.000

Direct labor 50.000 150.000

Variable manufacturing overhead 8.000 24.000

Variable selling and administration costs (12*3500 12.000 42.000

Total variable costs 98.000 261.000

Contribution 27.000 176.500

75.000

20.000

81.500

d. Income statement using absorption costing

Per unit ($) Amount ($)

437.500

Direct materials 15.000 45.000

Direct labor 50.000 150.000

Variable manufacturing overhead 8.000 24.000

Fixed manufacturing overhead 25.000 75.000Total cost of production 98.000 294.000

143.500

42.000

20.000

81.500Net income

Less: variable cost

Less: fixed costsFixed manufacturing overhead

Selling and administration expenses

Net income

Sales ($125*3,500)

Less: cost of goods sold

Gross profit

Less: Selling and administration costs

Variable selling and administration costs (12*3500

Selling and administration expenses

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