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Vaughn Manufacturing sells its product for $60 per unit. During 2019, it produced 58800 units and...

Vaughn Manufacturing sells its product for $60 per unit. During 2019, it produced 58800 units and sold 49000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $705600 manufacturing overhead, and $88200 selling and administrative expenses. Under absorption costing, what amount of fixed overhead is deferred to a future period?

$117600.
$147000.
$705600.
$29400.
Business   Accounting   
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Answer #1

Fixed manufacturing cost = $705,600

Number of units produced = 58,800

Number of units sold = 49,000

Ending inventory = Number of units produced- Number of units sold

= 58,800-49,000

= 9,800 units

Fixed manufacturing overhead included in ending inventory = Fixed manufacturing overhead x Ending inventory / Number of units produced

= 705,600 x 9,800/58,800

= $117,600

Hence fixed overhead deferred to future period = $117,600

First option is correct.

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