Puif Company's absorption costing income statements for the last two years are presented below: Year 1 Year 2 Sales $70,000 $90,000 Less cost of goods sold: Beginning inventory Add cost of goods manufactured 6,000 48,000 48,000 Goods available for sale 48,000 54,000 Less ending inventory 6,000 Cost of goods sold 42,000 54,000 Gross margin Less selling & admin. expenses Net operating income 28,000 36,000 25,000 31,000 $ 3,000 $ 5,000 Data on units produced and sold in each of these years are given below: Year 1 Year 2 Units in beginning inventory Units produced 1,000 8,000 8,000 Units sold 7,000 9,000 Fixed factory overhead totaled $16,000 in each year. This overhead was applied to products at a rate of $2 per unit. Variable selling and administrative expenses were $3 per unit sold.

Annual equivalent cost (AEC),

The equation for total costs (Y) is: Y = a+ bX In this equation, “a” represents:  Net income Cost of goods sold Total fixed costs The level of activity (e.g., the number of units produced) Total variable costs Variable cost per unit of X Total revenue

Sunland Products manufactures and sells a variety of camping products. Recently the company opened a new factory to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operation are shown below: Beginning inventory Units produced Units sold Manufacturing costs Fixed overhead Variable overhead Direct labour Direct material Selling and administrative costs Fixed Variable 0 units 11,200 10,100 $100,800 $3 $12 $28 $207,100 per unit. per unit per unit $3 per unit sold The portable cooking unit sells for $110. Management is interested in the opening month's results and has asked for an income statement.