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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