Question

chp 8 12) Inventory Valuation under Absorption Costing

Hansard Company produced 39,310 units during its first year of operations and sold 38,895 at $17 per unit. The company chose practical activity—at 39,310 units—to compute its predetermined overhead rate. Manufacturing costs are as follows:

Direct materials	$83,650
Direct labor	101,200
Variable overhead	15,800
Fixed overhead	50,300

Required:

1. Calculate the unit cost for each of these four costs. Round your answers to the nearest cent.

Unit direct materials cost	$
Unit direct labor cost	$
Unit variable overhead cost	$
Unit fixed overhead cost	$

2. Calculate the cost of one unit of product under absorption costing. Round your answer to the nearest cent.
$per unit

3. How many units are in ending inventory?
units

4. Calculate the cost of ending inventory under absorption costing. Round your answer to the nearest dollar.
$

Answer 1

1
Unit direct materials cost	2.13	=83650/39310
Unit direct labor cost	2.57	=101200/39310
Unit variable overhead cost	0.40	=15800/39310
Unit fixed overhead cost	1.28	=50300/39310
2
Cost of one unit of product under absorption costing = 2.13+2.57+0.40+1.28= $6.38
3
Units in ending inventory = 39310-38895= 415
4
Cost of ending inventory under absorption costing = 415*6.38= $2648