Accounting Help: How to calculate new product cost per unit for Variable & Absorption costing?

Question

In 2017, ABS manufacturing produced and sold 50,000 units of "x" product in their first year. The following info is provided:

Total sales: (50,000 x $80) 4,000,000

Units Produced and Sold: 50,000

Direct Material $35 per unit

Direct labor $10 per unit

Variable Overhead: $5 per unit

Fixed Overhead: $8 per unit

Selling & admin:

Variable S&A $2 per unit

Fixed S&A $10 per unit

1) Calculate product cost per unit under Variable & Absorption Costing:

I did that, and got $58 for Absorption, and $50 for Variable.

We also had to prepare the income statement under both methods, which I did.

However, question 3 says the production manager of the company would like to increase the units produced from 50,000 to 80,000 units of "x".

How do I calculate the new product cost per unit under variable and absorption, as well as prepare the income statement under both methods?

So far, i know that the Direct materials, labor stay the same, and I know total fixed cost stays the same, but how does var. and fixed overhead change? HELP! thank you in advance.

Answer 1

You are on the right track. Under Absorption costing the fixed overhead of $8 does not change. It stays atr $8 times 50,000 units. Under Var costing also it does not change.

You need to prepare the income statement . For that you need to know how many units were sold and what was the selling price.