1. AGA company manufactures and sells a product for $20 per Kg. The data for the
year 2016 is given below:
• Sales in kgs: 75,000 kgs
• Finished goods inventory at the beginning of the period: 12,000 kgs
• Finished goods inventory at the closing of the period: 17,000 kgs
Manufacturing costs:
• Variable cost: $8 per Kg
• Fixed manufacturing overhead cost: $320,000 per year
Marketing and administrative expenses:
• Variable expenses: $2 per Kg of sale
• Fixed expenses: $300,000 per year
Required:
a. Calculate unit product cost under absorption and variable costing methods
(1p)
b. Income statement using absorption costing methods (2p)
c. Income statement using variable costing methods. (2p)