Reliable Inc. uses absorption costing in a FIFO inventory system.Reliable had opening inventory of 150 units...
Reliable Inc. uses absorption costing in a FIFO inventory system.Reliable had opening inventory of 150 units at a cost of $35 per unit. Ending inventory is 110 units. During 2017 Reliable sold 1,500 units at $55 each. The following costs apply to Reliable's operations for the year ended December 31, 2017.
|
Direct material used in production |
$ 14 per unit |
|
Direct labour incurred |
6 per unit |
|
Fixed manufacturing overhead |
$ 16,050 |
|
Variable manufacturing overhead |
$ 6 per unit |
|
Selling costs (40% variable) |
$ 20,000 |
|
Admin costs (10% variable) |
$ 30,000 |
Round to the nearest whole number. Do not use decimals or commas in your answer.
(a) What is the fixed manufacturing overhead cost for each unit of ending inventory? / unit
(b) What is Reliable's total cost of ending inventory at Dec 31, 2017?
(c) What amounts will be reported on Reliable 's Income Statement for:
Cost of goods sold
Gross profit
Period costs
(d) Reliable also prepares a variable costing income statement for internal purposes. Assume the fixed manufacturing overhead attached to each unit in beginning inventory was $14 per unit. Will their variable costing net income be higher or lower than under absorption costing and by how much?
Homework Answers
ANSWER:-
1). Fixed Overhead Manufacturing Cost per unit = Fixed Overhead / Units produced
= 16050 / 110
= $145.90
2). Total Cost = [Average Variable Manufacturing Overhead + Average Fixed Manufacturing Overhead]
x Number of units
= [6 + 145.90] x 110
= $16,709
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