Question

Trio Company reports the following information for the current year, which is its first year of operations.

Direct materials	$	15	per unit
Direct labor	$	16	per unit
Overhead costs for the year
Variable overhead	$	75,000	per year
Fixed overhead	$	150,000	per year
Units produced this year		25,000	units
Units sold this year		19,000	units
Ending finished goods inventory in units		6,000	units

1. Compute the product cost per unit using absorption costing

2. Determine the cost ending finished goods inventory using absorption costing.

3. Determine the cost of goods sold using absorption costing.

Answer 1

1.

Direct material	15
Direct labor	16
Variable overhead (75,000/25,000)	3
Fixed overhead (150,000/25,000)	6
Product cost per unit	$40

2.

Ending finished goods inventory = 6,000 units

Cost of ending finished goods inventory = Ending finished goods inventory x cost per unit

= 6,000 x 40

= $240,000

3.

Number of units sold = 19,000 units

Cost of goods sold = Number of units sold x Cost per unit

= 19,000 x 40

= $760,000

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