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BUS 630 Week 3 DQ 1 Fixedlabor

BUS 630 Week 3 DQ 1 Fixedlabor

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BUS 630 Week 3 DQ 1 FixedLabor

Far North Telecom, Ltd., of Ontario, has organized a new division to manufacture and sell specialty cellular telephones.  The division’s monthly costs are shown in the table below.  Far North Telecom regards all of its workers as full-time employees and the company has a long-standing no layoff policy.  Furthermore, production is highly automated.  Accordingly, the company includes its labor costs in its fixed manufacturing overhead.  The cellular phones sell for $150 each.  During September, the first month of operations, the following activity was recorded: 12,000 units produced, 10,000 units sold.  Comment on the five questions below the table.  Respond to at least two of your fellow students’ postings. 

Manufacturing costs:


Variable costs per unit:


Direct Materials


Variable manufacturing overhead


Fixed manufacturing overhead costs (total)


Selling and administration costs:



12% of sales

Fixed (total)


a.  Compute the unit product cost under:
         i.  absorption costing 
        ii.  variable costing
b.  Prepare an absorption costing income statement for September
c.  Prepare a contribution format income statement for September using variable costing.
d.  Assume that the company must obtain additional financing in order to continue operations.  As a member of top management, would you prefer to rely n the statement in (b) above or in (3) above when meeting with a group of prospective investors?


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