Question

Yankee Corporation manufactures a single product. The company has the following cost structure: Variable costs per unit: Production $4 Selling and administrative $1 Fixed costs in total: Production $12,000 Selling and administrative $8,000 Last year, 4,000 units were produced and 3,500 units were sold. There were no beginning inventories. Under absorption costing, the cost of goods sold for the year would be:

Answer 1

Calculation of Cost of Goods sold
Variable production cost	14000	(3500*4)
Variable selling and admin expense	3500	(3500*1)
Fixed production cost	10500	(12000/4000*3500)
Fixed selling and admin expense	8000
Cost of Goods sold	36000
Note : Under absorption costing, fixed production cost are absorbed / charged for the units which has been sold and not for units which are still in the inventory.