UHF Antennas,Inc Management Is Anxious to See How Profitable the New Antenna

Essay

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:
$\begin{array}{|l|r|}\hline \text { Selling price } & \$ 108 \\\hline \text { Beginning inventory } & 0 \\\hline \text { Units produced } & 35,000 \\\hline \text { Units sold } & 30,000 \\\hline \text { Selling price per unit } & \$ 50\\ \hline\text { Selling and administrative expenses: } & \\\hline \text { Variable per unit } &\$2 \\\hline \text { Fixed (total) } &\$ 360,000 \\\hline \text { Manufacturing costs: }\\\hline \text { Manufacturing costs: } &\$ 9 \\\hline \text { Direct material cost per unit } & \$ 8 \\\hline \text { Direct labour cost per unit } & \$ 3\\\hline \text { Variable overhead cost per unit } & \$ 350,000 \\\hline\end{array}$

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 labour 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 operating income.