Question

# Hayes Inc. provided the following information for the current year: Beginning inventory 300 units Units produced...

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- 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

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