a.

Unit product cost under variable costing Product cost under variable costing Direct materials Direct labor Variable manufacturing overhead Variable selling and admin Total cost b. unit costing under absorption costing Manufacturing overhead per unit = total overheads / production units Product cost under absorption costing Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost

Unit cost Amount ($) 15.000 45.000 50.000 150.000 8.000 24.000 12.000 36.000 85.000 255.000

$25/unit Unit cost Amount ($) 15.000 45.000 50.000 150.000 8.000 24.000 25.000 75.000 98.000 294.000

c. Income statement using variable costing method

Sales ($125*3,500) Less: variable cost Direct materials Direct labor Variable manufacturing overhead Variable selling and administration costs (12*3500 Total variable costs Contribution Less: fixed costs Fixed manufacturing overhead Selling and administration expenses Net income d. Income statement using absorption costing Sales ($125*3,500) Less: cost of goods sold Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost of production Gross profit Less: Selling and administration costs Variable selling and administration costs (12*3500 Selling and administration expenses Net income

125.000 15.000 50.000 8.000 12.000 98.000 27.000

Amount ($) 437.500 45.000 150.000 24.000 42.000 261.000 176.500

75.000 20.000 81.500

Per unit ($) Amount ($) 437.500 15.000 50.000 8.000 25.000 98.000 45.000 150.000 24.000 75.000 294.000 143.500

42.000 20.000 81.500