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Required information Exercise 6-9 Income statement under absorption costing and variable costing LO P1, P2 The following information applies to the questions displayed below Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 42,000 units and sold 34,000 units at a price of $140 per unit. Manufacturing costs Direct materials per unit Direct labor per unit Variable overhead per unit Fixed overhead for the year $60 504,000 Selling and administrative costs Variable selling and administrative cost per unit Fixed selling and administrative cost per year $ 105,000 Exercise 6-9 Part 1a 10. Assume the company uses absorption costing. Determine its product cost per unit. Per unit product cost using Absorption costing Cost per unit1b. Assume the company uses absorption costing. Prepare its income statement for the year under absorption costing. COOL SKY Absorption Costing Income Statement Net income (loss)20. Assume the company uses variable costing. Determine its product cost per unit. Variable costing Per unit product cost using: Cost per unit2b. Assume the company uses variable costing. Prepare its income statement for the year under variable costing COOL SKY Variable Costing Income Statement Net income (loss)

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1a) Computation of Units Product Cost: Absorbtion Particulars Direct material cost Direct labour cost Variable overhead cost Fixed overhead cost (504000/42000) Total cost per unit Costing 60.00 22.00 8.00 12.00 102.00 1b) Determination of Net Income under Absorbtion costing system: Particulars Sales (34000#140) Less: Cost ofgoods sold AmountS Amount S 4,760,000 Beginning inventory Add: Cost of goods manufactured (42000#102) Goods available for sales Less: Ending inventory ((42000-34000)#102) 4,284,000 4,284,000 (816,000) Cost of goods sold Gross margin Less: Selling and Admin expenses 3,468,000 1,292,000 Variable selling and administative ex penses @11 per unit sold 374,000 Fixed Selling and Administrative expenses 105,000 Total Fixed Expenses Operating Income 479,000 813,0002a) Computation of Units Product Cost: Variable Particulars Direct material cost Direct labour cost Variable overhead cost Fixed overhead cost (504000/42000) Total cost per unit Costing 60.00 22.00 8.00 90.00 2b) Determination of Net Income under Variable costing system Particulars Sales Less:Variable expenses AmountS Amount S 4,760,000 Beginning inventory Add: Cost of goods manufactured (42000*90) Goods available for sales Less: Ending inventory ((42000-34000)#102) 3,780,000 3,780,000 (816,000) Variable cost of goods sold Less: Variable selling and admin expenses @11 per unit sold Contribution margin Less: Fixed expenses 2,964,000 (374,000) 1,422,000 Fixed manufacturing overhead Fixed selling and Admin expenses 504,000 105,000 Total Fixed Expenses Operating Income 609,000 813,000

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