Question

Chuck Wagon Grills, Inc., makes a single product-a handmade specialty barbecue grill that it sells for $200. Data for last year's operations follow: 10,400 9,500 900 Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 64 Total variable cost per unit $ 136 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative $ 312,000 520,000 Total fixed costs $ 832,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill. Unit product cost $ 146

Answer 1

Required 1 :
	Absorption costing
Direct materials per unit	64
Direct labor per unit	37
Variable manufacturing overhead per unit	15
Fixed manufacturing overhead per unit [ Fixed manufacturing overhead / Units produced = 312000 / 10400 ]	30
Unit product cost	146

Required 2 :
Chuck Wagon Grills , Inc.
Absorption Costing income statement
Sales ( 9500 * 200 )	1900000
Cost of goods sold ( 9500 * 146 )	1387000
Gross margin	513000
Selling and administrative expenses [ ( 9500 * 20 ) + 520000 ]	710000
Net operating income (loss)	(197000)