Paint More LLC has organized a new division to manufacture and sell specialty paint. The division’s monthly costs are shown below:
Manufacturing costs:
Variable costs per unit:
Direct materials
$12
Variable manufacturing overhead
$1
Fixed manufacturing overhead costs (total)
$100,000
Selling and administrative costs:
Variable
7% of sales
Fixed (total)
$31,000
Because the production is highly automated, the company includes its labor costs in its fixed manufacturing overhead. The gallons of paint sell for $68 each. During September, the first month of operations, the following activity was recorded:
Units produced 5,000
Units sold 4,000
1. Compute the unit product cost under:
1. Absorption costing
2. Variable costing
2. Prepare an absorption costing income statement for September
3. Prepare a contribution format income statement for September using variable costing
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