EXERCISE 6–1

Mega Company, which has only one product, has provided the following data concerning its
most recent month of operations:
Selling price $150
Units in beginning inventory 0
Units produced 3,100
Units sold 2,700
Units in ending inventory 400
Variable costs per unit:
Direct materials $46
Direct labor $50
Variable manufacturing overhead $7
Variable selling and administrative $11
Fixed Costs
Fixed manufacturing overhead $86,800
Fixed selling and administrative $8,100
Required:
a. Compute the unit product cost under absorption and variable costing method.
b. Prepare the income statement under absorption and variable costing method.
c. Reconcile the variable costing and absorption costing net operating incomes for
the month.