Question

For the current year, Nguyen Inc., had sales of 75,000 units and production of 100,000 units. Assume the production volume variance is written-off to other expense at the end of the period. Information for the year included: (8) Carry unit cost calculations to 3 decimal places.

Direct manufacturing labour                       $187,500

Variable manufacturing overhead                 100,000

Direct materials                                           150,000

Variable selling expenses                            100,000

Fixed administrative expenses                     100,000

Fixed manufacturing overhead                     200,000

There was no beginning inventory.

a. Calculate the unit cost under both absorption and variable costing (4)

b.   Compute the ending finished goods inventory under both absorption and variable costing. (2)

c.   Compute the cost of goods sold under both absorption and variable costing. (2)

Answer 1

	Absorption	Variable
Direct Materia	150,000	150,000
Direct Manufacturing Laboyr	187,500	187,500
Variable Manufacturing Overhead	100,000	100,000
Fixed Manufacturing Overhead	200,000	0
Cost of goods Manufactured	$637,500	$437,500
Add: Fixed administrative expenses	100,000	0
Cost of production	$737,500	$437,500
Less: Cost of finished goods Inventory
($737,500/100,000 unit) x 25000 unit	184,375
($437,500/100,000 unit) x 25000 unit		109,375
Cost of goods Sold	553,125	328,125
Add: Variable selling expenses	100,000	100,000
Cost of Sale	$653,125	$428,125
a) Product cost per unit = Cost of production/100000 unit
Absorption per unit cost = $737,500/100,000 unit= $7.375
Variable per unit cost = $437,500/100,000= $4.375
b) Cost of finished goods inventory	$184,375	$109,375
c) Cost of goods sold	$553,125	$328,128