Paint More LLC has organized a new division to manufacture and sell specialty paint. The division’s monthly

Paint More LLC has organized a new division to manufacture and sell specialty paint.  The division’s monthly costs are shown below:

Manufacturing costs:

   Variable costs per unit:

   Direct materials                                                 $12

   Variable manufacturing overhead                           $1

   Fixed manufacturing overhead costs (total)   $100,000

Selling and administrative costs: 

     Variable                                     7% of sales

     Fixed (total)                              $31,000

Because the production is highly automated, the company includes its labor costs in its fixed manufacturing overhead.  The gallons of paint sell for $68 each.  During September, the first month of operations, the following activity was recorded:

Units produced     5,000

Units sold            4,000

Required:

1.  Compute the unit product cost under:

         1. Absorption costing

         2. Variable costing

2.  Prepare an absorption costing income statement for September

3.  Prepare a contribution format income statement for September using variable costing