Wiengot Antennas, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plant’s operation.

Wiengot Antennas, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plant’s operation.

Beginning inventory		0
Units produced		40,000
Units sold		35,000
Selling price per unit		$60
Selling and administrative expenses:
Variable per unit		$2
Fixed (total)	$	560,000
Manufacturing costs
Direct materials cost per unit		$15
Direct labor cost per unit		$7
Variable manufacturing overhead cost per unit		$2
Fixed manufacturing overhead cost (total)	$	640,000

Because the new antenna is unique in design, management is anxious to see how profitable it will be and has asked that an income statement be prepared for the month.

   

Required:

1.	Assume that the company uses absorption costing.

  

a.	Determine the unit product cost. (Omit the "$" sign in your response.)

Unit product cost

$

b.	Prepare an income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Absorption Costing Income Statement
Sales	$
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income (loss)	$

    

2.	Assume that the company uses variable costing.

   

a.	Determine the unit product cost. (Omit the "$" sign in your response.)

Unit product cost

$

b.	Prepare a contribution format income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

    

Variable Costing Income Statement
Sales		$
Variable expenses:
Variable cost of goods sold	$
Variable selling and administrative expenses
Contribution margin
Fixed expenses:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Net operating income (loss)		$

Explanation: 1.
a.
The unit product cost under absorption costing is:
 

Direct materials	$	15
Direct labor		7
Variable manufacturing overhead		2
Fixed manufacturing overhead (640,000 ÷ 40,000 units)		16
Absorption costing unit product cost	$	40

b.

Sales (35,000 units × $60 per unit) = $2,100,000

Cost of goods sold (35,000 units × $40 per unit) = $1,400,000

Selling and administrative expenses (35,000 units × $2 per unit) + $560,000 = $630,000

2.
a.
The unit product cost under variable costing is:
 

Direct materials	$	15
Direct labor		7
Variable manufacturing overhead		2
Variable costing unit product cost	$	24

b.

Sales (35,000 units × $60 per unit) = $2,100,000

Variable cost of goods sold (35,000 units × $24 per unit) = $840,000

Variable selling and administrative expense (35,000 units × $2 per unit) = $70,000