Question

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $763. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 25,000 Units sold 22,000 Units in ending inventory 3,000 Variable costs per unit: Direct materials $ 210 Direct labor $ 340 Variable manufacturing overhead $ 47 Variable selling and administrative $ 19 Fixed costs: Fixed manufacturing overhead $ 890,000 Fixed selling and administrative $ 850,000

Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan.

Answer 1

1)	Absorption costing unit product cost
	Direct materials				210
	direct labor				340
	Variable manufacturing overhead				47
	fixed manufacturing overhead (890000/25000)				36
	Absorption costing unit product cost				633
2)	Variable costing unit product cost
	Direct materials				210
	direct labor				340
	Variable manufacturing overhead				47
	Variable costing unit product cost				597