A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (5,000 units):       Direct materials $70,000     Direct labor 20,000     Variable factory overhead 10,000     Fixed factory overhead 2,000 $102,000       Operating expenses:       Variable operating expenses $17,000     Fixed operating expenses     1,000 18,000 1,000 units remain unsold at the end of the month and sales total $150,000 for the month

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A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (5,000 units):
Direct materials	$70,000
Direct labor	20,000
Variable factory overhead	10,000
Fixed factory overhead	2,000	$102,000
Operating expenses:
Variable operating expenses	$17,000
Fixed operating expenses	1,000	18,000

1,000 units remain unsold at the end of the month and sales total $150,000 for the month.

Calculate the amount of i) income from operations and ii) ending inventory:

Hints:

• Calculate the production costs per unit under each costing system.
• Under absorption costing: Production costs per unit = DM + DL + VFOH + FFOH
• Under variable costing: Production costs per unit = DM + DL + VFOH
• Use the production costs per unit to calculate income from operation and ending inventory.

1. Under the absorption costing income statement

Income from operation:

Ending Inventory:

2. Under the variable costing income statement

Income from operation:

Ending Inventory: