Question

# Inventory Valuation under Absorption Costing Amiens Company produced 20,000 units during its first year of operations...

Inventory Valuation under Absorption Costing

Amiens Company produced 20,000 units during its first year of operations and sold 18,900 at \$17 per unit. The company chose practical activity—at 20,000 units—to compute its predetermined overhead rate. Manufacturing costs are as follows:

 Direct materials \$ 80,000 Direct labor 101,400 Variable overhead 15,600 Fixed overhead 54,600

Required:

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

Direct Materials Cost \$

Direct Labor Cost \$

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

\$

3. How many units are in ending inventory?

\$

4. Calculate the cost of ending inventory under absorption costing.

\$

1. Calculate the unit cost for each of these four costs.

Direct materials \$ 80,000 / 20000 unit = \$4 per unit

Direct labor 101,400 / 20000 unit = \$5.07 per unit

Variable overhead 15,600 / 20000 unit = \$ 0.78 per unit

Fixed overhead 54,600 / 20000 unit = \$ 2.73 per unit

here we divide 20000 unit because when company produce the product ,material will purchase for all 20000 unit , and other expenses also spend for 20000 unit .

2. Calculate the cost of one unit of product under absorption costing.

total cost = 4+5.07+0.78+2.73 = \$ 12.58 one unit of product

3. How many units are in ending inventory?

= 18900 unit sold

1100 units are in stock

4. Calculate the cost of ending inventory under absorption costing.

\$ 1100 * \$12.58 = \$ 13838

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