Question

1. ABC Co. sells its product for $60 per unit. During 2019, it produced 70,000 units and sold 60,000 units (there was no beginning inventory). Costs per unit are: direct materials $14, direct labor $8, and variable manufacturing overhead $3. Fixed costs are: $721,000 manufacturing overhead, and $90,000 selling and administrative expenses

Cost of goods sold under absorption costing is?

Answer 1

Unit Product Cost - Absorption Coting Direct Material $14.00 Direct Labour $8.00 Variable Manufacturing Overheads $3.00 Fixed Manufacturing Overheads NOTE 1 $10.30 Total Manufacturing Overheads $35.30 NOTE1 = $721,000/70000 = $10.30 Opening Inventory 0 Production 70000 Available For Sale (A) 70000 Closing Inventory (A - B) 10000 Sales (B) 60000 Absorption Costing - Cost Sheet Opening Inventory $0 Cost Of Goods Manufactured 70000*$35.30 $24,71,000 Cost Of Goods Available For Sale $24,71,000 Less: Closing Inventory 1000*$35.30 $3,53,000 Cost Of Goods Sold $21,18,000

Only product costs forms part of Cost Of Goods Sold. Sellind and administration overheads do not form part of cost of goods sold. They are considered separately in Income Statement.