Accounting
Directions: Your assignment this week requires you to answer a four-part problem (Parts A – D) using the
company data provided below. As always, please show your work for full credit and use the boxes provided
for each answer. If you need more room in an answer box, just add more rows or columns to the box.
MountainAir Company has the following selected data for the past year:
Units sold during year 30,000
Units produced during year 45,000
Units in ending inventory 15,000
Variable manufacturing cost per unit $4.50
Fixed manufacturing overhead (in total) $20,250
Selling price per unit $12.00
Variable selling and administrative expense per unit $1.00
Fixed selling and administrative expenses (in total) $4,000
There were no units in beginning inventory.
Required:
a. Prepare an income statement for last year using absorption (full) costing.
b. Calculate the total value of the ending inventory using absorption (full) costing.
c. Prepare an income statement for last year using variable costing (i.e., contribution margin income
statement).
d. Calculate the total value of the ending inventory using variable costing.