The Tijama Manufacturing Company has determined the cost of manufacturing a unit of
product to be as follows, based on annual production of 50,000 units per year:
Direct materials $20.00
Direct labor 15.00
Variable factory overhead 10.00
Fixed factory overhead 12.00
Operating statistics for the month of August and September are as follows:
August September
Units produced 4,200 3,500
Units sold 3,500 4,200
Selling and administrative expenses $25,000 $35,000
The selling price is $75 a unit. There were no inventories on August 1, and there is no
work in process at September 30.
Prepare comparative income statements for each month under both absorption costing
and direct costing. Use the forms at the end of this examination to complete this problem.
Answer will be sent by email as attachment.
