EXERCISE 7-9 (20 MINUTES)

1. a. and b. Absorption Costing Variable Costing

Year 1 Year 2 Year 1 Year 2

Variable production costs... $ 8 $ 8 $8 $8

Fixed manufacturing overhead costs:

$300,000 ÷ 20,000 units... 15

$300,000 ÷ 25,000 units... 12

Unit product cost ... $23 $20 $8 $8