Alana's foods produces frozen meals that it sells for $12 each. the company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. assume all costs and production levels are exactly as planned. the following data are from alana's foods's first month in business:
jan 2011
sales 1200 meals
production 1500 meals
variable manufacturing cost per meal $6
sales commission cost per meal $2
total fixed manufacturing overhead $1,050
total fixed marketing and administrative costs $300
requirements 1. compute the product cost per meal produced under absorption costing and under variable costing.
2. prepare income statements for january 2011 using
a. absorption costing.
b. variable costing.
3. is operating income higher under absorption costing or variable costing in january?