The Minler Company Began the Year 2006 with No Inventories

Essay

The Minler Company began the year 2006 with no inventories of work in process or finished goods. The company produces a single product, and cost data for the product are given below. The company uses an actual cost system. The selling price of the product is $50 per unit. There were no work in process inventories at the end of each month.
a. Determine the unit cost of production for each month under:
(i) variable costing
(ii) absorption costing
b. Prepare income statements for the three months under:
(i) variable costing
(ii) absorption costing
c. If selling prices and costs do not change significantly, what can be said about the relationship of income under absorption costing and variable costing when:
(i) sales equal production
(ii) sales are less than production
(iii) sales are greater than production