Variable and Absorption Costing Unit Product Costs
Shastri Bicycle of Bombay. India. produces an inexpensive yet rugged, bicycle for use on the city’s crowded streets that it sells for500mpees. (Indian currency is denominated in rupees, denoted by R.) Selected data for the company's operations last year follow:
Units in beginning inventory | 0 |
Units produced | 10,000 |
Units sold | 8,000 |
Units in ending inventory | 2,000 |
Variable costs per unit | |
Direct materials | R120 |
Direct labor | R140 |
Variable manufacturing overhead | R50 |
Variable selling and administrative | R20 |
Fixed costs: | |
Fixed manufacturing overhead | R600,000 |
Fixed selling and administrative | R400,000 |
Required:
1. Assume that the company uses absorption costing. Compute the unit product cost for one bicycle.
2. Assume that the company uses variable costing. Compute the unit product cost for one bicycle.
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