Asked by Florence Nichole Rogan on Jun 22, 2024
Verified
Castaway Company reports the following first year production cost information:
a.Compute production cost per unit under variable costing.
b.Compute production cost per unit under absorption costing.
c.Determine the cost of ending inventory using variable costing.
d.Determine the cost of ending inventory using absorption costing.
Variable Costing
A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a product.
Absorption Costing
A system for determining product costs that encompasses all manufacturing expenses, including direct materials, direct labor, and overheads, regardless of them being fixed or variable.
Ending Inventory
The value of goods available for sale at the end of an accounting period.
- Work out the cost associated with each unit produced and calculate the closing inventory costs with both variable and absorption costing.
Verified Answer
b.$53 + ($3,339,000/53,000)FOH = $116 per unit under absorption costing
c.(53,000 units - 51,000 units)× $53 per unit = $106,000 ending inv.under variable costing
d.(53,000 units - 51,000 units)× $116 per unit = $232,000 ending inv.under absorption costing
Learning Objectives
- Work out the cost associated with each unit produced and calculate the closing inventory costs with both variable and absorption costing.
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