Question

During July Roy Company produced 4,000 units. Roy has provided the following data for the month:

Variable costs per unit

Direct Materials - $41

Direct Labor - $43

variable manufacturing overhead - $6

variable selling and administrative (i.e sales commission and shipping cost per unit) - $4

Fixed Costs

fixed manufacturing overhead - $21 ($84,000 per month)

fixed selling and administrative - $9 ($36,000 per month)

Assume that the unsold units produced in July were partially damaged in storage. The units can be sold through regular channels at reduced prices. The unsold units will be valueless sold this way.

1) The relevant cost for determining the minimum selling price for these units is:

A. $115

B. $13

C. $124

D. $94

E. $4

2) Under absorption costing, any unsold units produced in July would be carried in the inventory account at a unit product cost of:

A. $124

B. $115

C. $90

D. $111

E. $120

3) Under variable costing, any unsold units produced in July would be carried in the inventory account at a unit product cost of:

A. $94

B. $115

C. $90

D. $111

E. $124

Answer 1

0 Cosser auswer $4 Since this damaged Units are already manufachine and Only cost be incurred ie only variable selling & adminishathe cast therefore relevant cost for devermining minimum minimum selling price will be $4. Under absorption are not treated as costing selling & adminißrathe expenses produer cost. Chit product cost of unsold inventory UI + 4 3 +6 +21 conect answer $10 Under Variable costing al fixed cost are treated as period & not product Cost Cost Unit product cost of unsold Ihrentory 41+43 +6 $90 -) Since Variable on unsold selling & admin expenses are not incurred Inventory same is not included in Unit Cost Comur answer is $90