You are given the following traditional income statement for Monopoly company, which produces the monopoly board game, for the month of June
X. Company
Income statement
For the month ended 30.June.2020	
Net sales revenue 	$5,000,000	
Cost of goods sold 		
   Variable COGS 	(1,950,000)	
   Fixed COGS	(1,625,000)                      (3,575,000)	
Gross profit 	1,425,000	
Selling and administrative expense		
   Variable S & A exp 	(500,000)	
   Fixed S &A exp 	(100,000)                        (600,000)	
Operating income 	$825,000	

You know that 70,000 units were produced during June 2020 of which 65,000 units were sold - leaving 5,000 units in the ending inventory.
A.	For the month of June.2020, Calculate the product cost per unit using the variable costing method. 
B.	For the month of June.2020, Calculate the period cost using the variable costing method.
C.	For the month of June.2020, Calculate the total variable cost amount that will appear in the contribution margin income statement .
D.	For the month of June.2020, Calculate the total fixed cost amount that will appear in the contribution margin income statement
E.	Following to the previous information, If you knew that monopoly company give its managers bonuses based on its operating income. Which method (variable costing or absorption costing) would the managers prefer to use? Briefly explain why 

A.	Product per unit using Variable costing method 
D,M per unit + D.L per unit + Variable overhead per unit = variable COGS/ units sold = 1,950,000/ 65,000 = 30 per unit 
Explanation 
Variable COGs = (D.M per unit + D.L per unit  + Variable manu per unit )* units sold = product cost per unit ( variable) * units sold
Or 
Total variable cost =(product cost per unit + variable S& A exp per unit ) * units sold 
Variable COGS + variable S & A exp = ( product cost per unit + variable S& A exp per unit ) * units sold
1,950,000 + 500,000 = (product cost per unit + (500,000/65,000)) * 65,000
2,450,000 = (product cost per unit +7.69 )* 65,000 
2,450,000/65,000 = P.C per unit + 7.69 
37.69 = P.C per unit + 7.69 
Product cost per unit = 30 

B.	period cost using variable costing method 
Variable S & A exp + Fixed S & A exp + Fixed manu. Overhead 
Variable S & A exp + Fixed S & A exp + ((Fixed COGS/ units sold) * units produced) 
500,000 + 100,000 + (( 1,625,000/ 65,000) *70,000))=  
500,000 +100,000 + 1,750,000 = 2,350,000 

Explanation : 
COGS = Product cost per unit * units sold 
     = (D.M per unit + D.L per unit + Variable manu overhead per unit + fixed manu overhead per unit )* units sold 
     = (D.M per unit + D.L per unit + Variable manu overhead per unit + Total fixed manu / units produced )* units sold
3,575,000 = (30 + (T.F.Manu / 70,000 ))* 65,000 
3,575,000/65,000 = (30+ (T.F.MAU /70,000) 
55 = (30+ (T.F.MAU /70,000)
55- 30 = T.F.M /70,000 
25* 70,000 = T.F.M 
1,750,000 

C.	Total variable cost – variable costing method ( C.M income statement) 
Total variable S & A exp + Total variable COGS 
500,000 + 1,950,000 = 2,450,000 
D.	Total fixed amount – variable costing method ( C.M income statement)
Fixed S & A exp + Fixed manu. Overhead 
100,000 + 1,750,000 = 1,850,000 
E.	Operating income ( C.M income statement) = T.R – t.v.c – t.f.c 
                                   = 5,000,000 – 2,450,000 – 1,850,000 = 700,000 
Operating income using C.M income statement (700,000) is lower that the operating income using traditional income statement (825,000). Thus managers would chose to prepare there income statement using absorption costing because higher operating income would lead to higher bonuses. 
Or 
Units sold is less than units produced absorption costing higher operating income because it will have lower cost. Thus Thus managers would chose to prepare there income statement using absorption costing because higher operating income would lead to higher bonuses.