Question

Zurgot Inc. has just organized a new division to manufacture and sell specially designed computer tables, using select hardwoods. The division's monthly costs are shown in the schedule below: Manufacturing costs: Variable costs per unit: Direct materials Variable manufacturing overhead Fixed manufacturing overhead costs (total) Selling and administrative costs: Variable Fixed (total) $ 162 $ 11 $605, 680 15% of sales $352,560 Zurgot regards all of its workers as full-time employees, and the company has a long-standing no-layoff policy. Furthermore, production is highly automated. Accordingly, the company includes its labour costs in its fixed manufacturing overhead. The tables sell for $538 each. During the first month of operations, the following activity was recorded: Units produced Units sold 4,520 3,430 Required: 1. Compute the unit product cost under each of the following costing method Unit Product Cost a. Absorption costing

Answer 1

1)				unit product cost
				Absorption	Variable
	Direct materials			162	162
	Variable MOH			11	11
	FMOH	(605680/4520)		134
	unit product cost			307	173
					unit product cost
	a)	Absorption costing			307
	b)	Variable costing			173
2)
	Sales				1845340
	cost of goods sold:
	Beginning inventory			0
	Add:Cost of goods manufactured			1387640
	Goods available for sale			1387640
	less:Ending inventory			334630	1053010
	Gross margin				792330
	Selling and administrative expense				629361
	operating income				162969
3)	Sales				1845340
	Variable expenses:
	variable cost of goods sold
	Beginning inventory			0
	add:Variable manufacturing costs			781960
	goods available for sale			781960
	less:Ending inventory			188570
	variable cost of goods sold			593390
	variable selling & adm expense			276801	870191
	contribution margin				975149
	Fixed expenses:
	Fixed manufacturing overhead			605,680
	fixed selling & adm expense			352,560	958,240
	operating income				16,909
5)
	Variable costing operating income						16,909
	Add:FMOH cost deferred in inventory under absorption costing						146060
	Absorption costing operating income(loss)						162,969