Question

Sierra, Inc. manufactures hair spray that sell for $4.00 per unit. The business had no inventory on May 1. The following data summarized the May and June operations. May June Units sold 5,500 6,500 Units produced 6,000 6,000 Costs: Variable factory overhead per unit $1.00 $1.00 Fixed factory overhead - total $3,000 $3,000 Variable administrative per unit $0.80 $0.80 Fixed administrative - total $1,200 $1,200 Q. Using absorption costing, the cost of goods sold for May is: Group of answer choices $5,500 $8,500 $8,250 $5,600

Answer 1

Variable factory overhead (5,500 x 1)	5,500
Fixed factory overhead	2,750
Cost of goods sold	$8,250

Number of units produced = 6,000

Variable factory overhead per unit = $1

Fixed factory overhead = $3,000

Number of units sold = 5,500

fixed factory overhead for 5,500 units = 3,000 x 5,500/6,600

= $2,750

the cost of goods sold for May is = $8,250

Third option is correct.

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