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Chapter 21: Q2SE (page 1167)

Computing unit product cost, absorption costing Calculate the unit product cost using absorption costing. Round your answer to the nearest cent.

Use the following information for Short Exercises S21-2 and S21-3.

Martin Company had the following costs:

Units produced 320 units Direct materials $ 71 per unit Direct labor 40 per unit Variable manufacturing overhead 13 per unit Fixed manufacturing overhead 7,360 per year Variable selling and administrative costs 22 per unit

Fixed selling and administrative costs 1,920 per year

Short Answer

Expert verified

Answer

The total unit product cost is $147.

Step by step solution

01

Calculation of fixed manufacturing overhead

Fixed manufacturing overhead = Total fixed manufacturing overhead / No. of units produced

=$7,360/320

=$23

02

Calculation of unit product cost

Particulars

Amount

Direct material

$71

Direct labor

$40

Variable manufacturing overhead

$13

Fixed manufacturing overhead

$23

Total unit product cost

$147

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Most popular questions from this chapter

Preparing variable and absorption costing income statements

Claudia’s Foods produces frozen meals that it sells for \(11 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Linda’s Foods’s first month in business:

January 2018 Units produced and sold: Sales 850 meals Production 1,050 meals Variable manufacturing cost per meal \) 5Sales commission cost per meal 1 Total fixed manufacturing overhead 315Total fixed selling and administrative costs 450 Requirements

1. Compute the product cost per meal produced under absorption costing and under variable costing.

2. Prepare income statements for January 2018 using: a. absorption costing. b. variable costing.

3. Is operating income higher under absorption costing or variable costing in January?

In the long run, all costs are controllable. Is this statement true? Why or why not?

Classifying costs Classify each cost by placing an X in the appropriate columns. The first cost is completed as an example.

Absorption Costing Variable Costing Product Cost Period Cost Product Cost Period cost

  1. Direct materials
  2. Direct labor
  3. Variable manufacturing overhead
  4. Fixed manufacturing overhead
  5. Variable selling and administrative costs
  6. Fixed selling and administrative cost

Using Excel for variable costing

Download an Excel template for this problem online in MyAccountingLab or athttp://www.pearsonhighered.com/Horngren. Tiger Mountain Gelato incurs thefollowing costs for its premium ice cream in May 2018:

Direct materials cost per pint $ 2.50 perpint

Direct labor cost per pint 0.75 per pint

Variable manufacturing overhead cost per pint 0.25 per pint

Fixed manufacturing overhead costs 6,000 per month

Total fixed selling and administrative costs 5,000 per month

Sales price per pint 8.00 per pint

Pints of gelato produced 12,000 pints

Pints of gelato sold 11,500 pints

There were no beginning inventories, so Tiger Mountain Gelato has 500 pintsin ending Finished Goods Inventory (12,000 pints produced less 11,500 pintssold).

Requirements

1. Calculate Tiger Mountain Gelato’s product cost per pint under absorptioncosting and variable costing.

2. Calculate the balance in Finished Goods Inventory on May 31, 2018, usingabsorption costing and variable costing.

3. Prepare income statements in good form for Tiger Mountain Gelato for May2018 using absorption costing and variable costing.

4. Reconcile the differences between operating incomes and Finished GoodsInventory balances between the two-costing method

Hayden Company has 50 units in Finished Goods Inventory at the beginning of the accounting period. During the accounting period, Hayden produced 150 units and sold 200 units for \(150 each. All units incurred \)80 in variable manufacturing costs and \(20 in fixed manufacturing costs. Hayden also incurred \)7,500 in Selling and Administrative Costs, all fixed. Calculate the operating income for the year using absorption costing and variable costing.
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