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Variable costs per unit Manufacturing: Direct Materials $24.00 Direct Labor $14.00 Variable manufacturing overhead $2.00 Variable selling and administrative $4.00
Fixed costs per year Fixed manufacturing overhead $800,000.00 Fixed selling and administrative expenses $496,000.00

Variable costing Absorption costing
1 - 2 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost

3-4 Sales Variable expenses: Variable cost of goods sold Variable selling and administrative Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Net operating gain (loss)

5-6 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income

7 Variable costing net operating income Add: fixed manufacturing overhead deferred in inventory under absorption costing Absorption costing net operating income

8 Profit = Unit CM X Q - Fixed expenses

9

10-11 Sales Variable expenses: Variable cost of goods sold Variable selling and administrative Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Net operating gain (loss)

12

13 Total East West Sales Variable expenses Contribution margin Traceable fixed expenses