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 $985. Selected data for the company's operations last year follow: 1.66 points 0 20,000 17,000 3,000 eBook 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 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative 260 500 58 23 Hint $740,000 $460,000 Print 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. References 1. Absorption costing unit product cost 2. Variable costing unit product cost

Answer 1

1	CALCULATION OF PER UNIT COST
		ABSORPTION COSTING			VARIABLE COSTING
		UNIT	RATE	AMOUNT	UNIT	RATE	AMOUNT
	DIRECT MATERIAL	20,000.00	260.00	52,00,000.00	20,000.00	260.00	52,00,000.00	(20000 X 260)
	DIRECT LABOUR		500.00	1,00,00,000.00		500.00	1,00,00,000.00	(20000 X 500)
	VARIABLE MANUFACTURING OVERHEAD		58.00	11,60,000.00		58.00	11,60,000.00	(20000 X 58)
	FIXED MANUFACTURING OVERHEAD			7,40,000.00				GIVEN
	MANUFACTUIRNG COST	20,000.00	855.00	1,71,00,000.00	20,000.00	818.00	1,63,60,000.00
	CLOSING STOCK OF FINISED GOODS	3,000.00	855.00	25,65,000.00	3,000.00	818.00	24,54,000.00	CALCULATED AS PER AVERAGE RATE
	COST OF GOODS SOLD	17,000.00	855.00	1,45,35,000.00	17,000.00	818.00	1,39,06,000.00
	FIXED MANUFACTURING OVERHEAD			-			7,40,000.00	GIVEN
	VARIABLE SELLING AND ADMINISTRATIVE EXPENSES		23.00	3,91,000.00		23.00	3,91,000.00	(17000 X 23)
	FIXED SELLING AND ADMINISTRATIVE EXPENSES			4,60,000.00			4,60,000.00	GIVEN
	COST OF SALES	17,000.00	905.06	1,53,86,000.00	17,000.00	911.59	1,54,97,000.00
	UNIT COST UNDER
	ABSORPTION COSTING	905.06
	VARIABLE COSTING	911.59
	NOTE :
	IN ABSORPTION COSTING FIXED MANUFACTURING EXPENSES IN THE PART OF COST OF PRODUCTION, BUT IN VARIABLE COSTING IT IS A PERIOD COST
2	CALCULATION OF PER UNIT COST
		ABSORPTION COSTING			VARIABLE COSTING
		UNIT	RATE	AMOUNT	UNIT	RATE	AMOUNT
	DIRECT MATERIAL	260.00	105.00	27,300.00	260.00	105.00	27,300.00	(260 X 105)
	DIRECT LABOUR		325.00	84,500.00		325.00	84,500.00	(260 X 325)
	VARIABLE MANUFACTURING OVERHEAD		45.00	11,700.00		45.00	11,700.00	(260 X 45)
	FIXED MANUFACTURING OVERHEAD			65,000.00				GIVEN
	MANUFACTUIRNG COST	260.00	725.00	1,88,500.00	260.00	475.00	1,23,500.00
	CLOSING STOCK OF FINISED GOODS	30.00	725.00	21,750.00	30.00	475.00	14,250.00	CALCULATED AS PER AVERAGE RATE
	COST OF GOODS SOLD	230.00	725.00	1,66,750.00	230.00	475.00	1,09,250.00
	FIXED MANUFACTURING OVERHEAD			-			65,000.00	GIVEN
	VARIABLE SELLING AND ADMINISTRATIVE EXPENSES		15.00	3,450.00		15.00	3,450.00	(230 X 15)
	FIXED SELLING AND ADMINISTRATIVE EXPENSES			21,000.00			21,000.00	GIVEN
	COST OF SALES	17,000.00	11.25	1,91,200.00	17,000.00	11.69	1,98,700.00
	UNIT COST UNDER
	ABSORPTION COSTING	11.25
	VARIABLE COSTING	11.69
	FIXED MANUFACTURING EXPENSES INCLUDED IN THE CLOSING STOCK OF FINISHED GOODS
	FIXED MANUFACTURING COST	65000
	TOTAL UNIT PRODUCED	260	UNITS
	PER UNIT COST = FIXED MANUFACTURING COST/TOTAL UNIT	250
	CLOSING STOCK	30	UNITS
	FIXED MANUFACTURING COST IN STOCK STOCK	$           7,500.00
	= CLOSING STOCK X PER UNIT COST
	INCOME STATEMENT IN VARIABLE COSTING
		QTY	RATE	AMOUNT
	SALES	230.00	870.00	2,00,100.00
	COST OF GOODS SOLD		475.00	1,09,250.00
	FIXED MANUFACTURING EXPENSE			65,000.00
	GROSS MARGIN			25,850.00
	SELLING AND ADMINISTRATIVE EXPENSE			24,450.00
	NET OPERATING INCOME			1,400.00