Question

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar 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 $806. Selected data for the company's operations last year follow: Units in beginning inventory Units produced 15,000 Units sold 12,000 Units in ending inventory 3,000 Variable costs per unit: Direct materials $ 220 Direct labor $360 Variable manufacturing $ 55 overhead Variable selling and $ 16 administrative Fixed costs: Fixed manufacturing overhead $ 610,000 Fixed selling and $ 650,000 administrative Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. Unit product cost 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan. Unit product cost

Answer 1

Answers

• Working

	(a) Absorption Costing	(b) Variable Costing
Direct Material per unit	$                  220.00	$                 220.00
Direct labor cost per unit	$                  360.00	$                 360.00
Variable manufacturing Overhead per unit	$                    55.00	$                   55.00
Fixed manufacturing Overhead per unit	$                    40.67 [$610000/15000 units produced]	$                          -
Manufacturing cost per unit	$                  675.67	$                 635.00

• Requirement 1: Unit product cost = $ 675.67 or $ 676
• Requirement 2: Unit Product cost = $ 635
• Note:
  >variable costing do not considers Fixed cost to be part of the product cost.
  >Selling & administrative expenses are not part of the unit product cost.