1. The company is using variable costing. The computations are:
Variable
Costing Absorption
Costing
Direct materials ... $ 9 $ 9
Direct labor ... 10 10
Variable manufacturing overhead .... 5 5
Fixed manufacturing overhead
($150,000 ÷ 25,000 units) ... — 6
Unit product cost ... $24 $30
Total cost, 3,000 units ... $72,000 $90,000
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