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:

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.

Question

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:

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.

Quizplus · Accepted Answer

The Answer of 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:

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.