Question

Ida Sidha Karya Company is a family-owned company located 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 $830. Selected data for the company’s operations last year follow:

Units in beginning inventory		0
Units produced		15,000
Units sold		12,000
Units in ending inventory		3,000
Variable costs per unit:
Direct materials	$	250
Direct labor	$	360
Variable manufacturing overhead	$	52
Variable selling and administrative	$	17
Fixed costs:
Fixed manufacturing overhead	$	870,000
Fixed selling and administrative	$	410,000

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. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan.

Direct material	250
Direct labour	360
Variable manufacturing overhead	52
Fixed manufacturing overhead (870000/15000)	58
Unit product cost	720

2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan.

Direct material	250
Direct labour	360
Variable manufacturing overhead	52
Unit product cost	662