Question

Hayes Inc. provided the following information for the current year:

Beginning inventory		300	units
Units produced		950	units
Units sold		994	units
Selling price	$	350	/unit
Direct materials	$	55	/unit
Direct labor	$	36	/unit
Variable manufacturing overhead	$	35	/unit
Fixed manufacturing overhead	$	49,400	/year
Variable selling/administrative costs	$	28	/unit
Fixed selling/administrative costs	$	35,500	/year

What is the unit product cost for the year using variable costing?

Multiple Choice

• $178

• $126

• $154

• $228

• $228
  

  During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $7 per unit, Direct labor, $5 per unit, Variable overhead, $6 per unit, and Fixed overhead, $279,000. The company produced 31,000 units, and sold 20,500 units, leaving 10,500 units in inventory at year-end. What is the value of ending inventory under absorption costing?

  Multiple Choice

• $189,000

• $283,500

• $94,500

• $279,000

• $468,000

Answer 1

Answer- The unit product cost for the year using Variable costing = $126 per unit.

Explanation-Unit product cost under Variable costing= Direct materials + Direct Labor+ Variable manufacturing overhead

= $55 per unit +$36 per unit +$35 per unit

= $126 per unit

Answer- The value of ending inventory under absorption costing is = $283500.

Explanation- Value of ending inventory under absorption costing= Ending inventory units* Unit product cost under Absorption costing

= $27 per unit*10500 units

= $283500

Where- Unit product cost under absorption costing = Direct materials + Direct Labor+ Variable Manufacturing overhead + Fixed Manufacturing overhead

= $7 per unit +$5 per unit +$6 per unit+ ($279000/31000 units)

= $27 per unit