Stark Corporation manufactures and sells a single product. Cost data for the product are given below:
Variable costs per unit:
Direct materials $10
Direct labor 14
Variable manufacturing overhead 5
Variable selling and administrative 3
Total variable cost per unit $32
Fixed costs per month:
Fixed manufacturing overhead $600,000
Fixed selling and administrative 300,000
Total fixed cost per month $900,000
The product sells for $80 per unit. Production and sales data for August follow:
There was no beginning inventory.
August 25,000 20,000
(a)Determine the unit product cost under:
(b)Prepare a variable costing income statement for August.
(c)Prepare an absorption costing income statement for August.
(d)Explain why the operating income is different in parts (a) and (b).