Variable and Absorption Costing Unit Product Costs and Income Statements iL01, LOTI 

Maxwell Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations: 

Variable costs per unit: Manufacturing: Direct materials  $18 Direct labor $7 Variable manufacturing overhead  $2 Variable selling and administrative  $2 Fixed costs per year: Axed manufacturing overhead $200,000 Fixed selling and administrative menses . $110,000 

During the year, the company produced 20,000 units and sold 16,000 units. The selling price of the company’s product is $50 per unit. 

Required: 1. Assume that the company uses absorption costing: a. Compute the unit product cost. b. Prepare an income statement for the year. 2. Assume that the company uses variable costing: a. Compute the unit product cost. b. Prepare an income statement for the year.