134) The Minler Company began the year 2006 with no inventories of work in process or finished goods. The company produces a single product, and cost data for the product are given below.
Direct material$10 per unit
Direct labour15 per unit
Manufacturing overhead6 per unit
Selling expenses4 per unit
Manufacturing overhead$50,000 per month
Selling and administrative20,000 per month
During the first three months of 2006, production and sales in units were as follows:
The company uses an actual cost system. The selling price of the product is $50 per unit. There were no work in process inventories at the end of each month.
a. Determine the unit cost of production for each month under:
b. Prepare income statements for the three months under:
c. If selling prices and costs do not change significantly, what can be said about the relationship of income under absorption costing and variable costing when:
(i)sales equal production
(ii)sales are less than production
(iii)sales are greater than production