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 $850. 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: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative 320 20 $ 60,000 $ 20,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan. 1. Absorption costing unit product cost 2. Variable costing unit product cost

Answer 1

Answer of Part 1:

Fixed Manufacturing Overhead per Unit = Fixed Manufacturing Overhead / Units Produced
Fixed Manufacturing Overhead per unit = $60,000 / 250
Fixed Manufacturing Overhead per unit = $240

Unit Product Cost = Direct Material + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead per unit
Unit Product Cost = $100 + $320 + $40 + $240
Unit Product Cost =$700

Answer of Part 2:

Unit Product Cost = Direct Material + Direct Labor + Variable Manufacturing Overhead
Unit Product Cost = $100 + $320 + $40
Unit Product Cost = $460