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 $691. Selected data for the company's operations last year follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 18,000 15,000 3,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 140 $330 45 17 Fixed costs: Fixed manufacturing overhead Pixed selling and administrative $650,000 $540,000 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 1. Absorption costing unit product cost |Variable costing unit product cost 2.

Answer 1

Calculate unit product Cost

	Absorption Costing	Variable Costing
Direct material	140	140
Direct labor	330	330
Variable manufacturing overhead	45	45
Fixed manufacturing overhead (650000/18000)	36	0
Unit product cost	551	515

1) Absorption Costing unit product Cost = $551

2) Variable costing unit product Cost = $515