UHF Antennas, Inc., produces and sells a unique television antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been reported for the first month of the new plant's operation:
Beginning inventory 0
Units produced 35000
Units sold 30000
Selling price per unit $50.00
Selling and Admin expenses
Variable per unit $2.00
Fixed total $360,000.00
Manufacturng costs
Direct material cost per unit $9.00
Direct labor cost per unit $8.00
Variable manufacturing cost per unit $3.00
Fixed manufacturing overhead cost total $350,000.00
Management is anxious to see how profitable the new antenna will be and has asked that an income statement be prepared for the month. Assume that direct labor is a variable cost.
Required:
a. Assuming that the company uses absorption costing, compute the unit product cost and prepare an income statement.
b. Assuming that the company uses variable costing, compute the unit product cost and prepare an income statement.
c. Explain the reason for any difference in the ending inventories under the two costing methods and the impact of this difference on reported net operating income.