1. Absorption and variable costing: KLM Inc. makes a single product. Actual data for the year are as follows:

Selling price per unit $20 Variable costs: Direct material used per unit 2 Direct labor cost per unit 5 Variable manufacturing cost per unit 1 Variable selling cost per unit 1 Annual fixed costs incurred: Manufacturing 240,000 Selling and administrative 105,000

The firm began the year with no inventories; 50,000 units were produced and 40,000 units were sold. There were no work in process inventories.

REQUIRED:

A. Assume absorption costing, compute the following:

1. Product cost per unit $____________________ 2. Total cost of goods manufactured $____________________

3. Total cost of ending inventory $____________________ 4. Total cost of goods sold $____________________ 5. Gross profit $____________________ 6. Net income $____________________
B. Assume variable costing, compute the following:

1. Product cost per unit $____________________ 2. Total cost of ending inventory $____________________ 3. Total contribution margin $____________________ 4. Net income $____________________

2. Absorption and Variable costing: A firm has prepared financial statements on both a direct costing and a full costing basis. The differences are as follows:

Basis 1 Basis 2 income $500,000 $440,000
Inventory change 140,000 200,000 (Decrease) (Decrease)

REQUIRED: Which basis is being used for direct and for full costing? Why?

3. Absorption and Variable costing: You are given the following inventory data for a firm. The data are both for the month of