Question

Computing inventory balances

Zeng Company reports the following data:

Finished Goods Inventory:

Beginning balance, in units 300 Units

Produced 2,900

Units sold (1,600)

Ending balance, in units 1,600

Production Costs: Variable manufacturing costs per unit $ 57

Total fixed manufacturing costs 26,100

Calculate the product cost per unit and the total cost of the 1,600 units in ending inventory using absorption costing and variable costing.

Short answer

Answer

• Total unit product cost under absorption and variable costings are $66 and $57 respectively.
• Total cost of 1,600 units under absorption and variable costings is $105,600 and $91,200 respectively.

Step-by-step solution

Calculation of unit product cost using absorption and variable costing

Particulars	Absorption Costing	Variable Costing
Variable manufacturing cost per unit	$57	$57
Total fixed manufacturing costs ($26,100/2,900)	$9	-
Total unit product cost	$66	$57

Calculation of total cost of the 1,600 units in ending inventory using absorption and variable costing

Particulars	Absorption Costing	Variable Costing
Total unit product cost	$66	$57
Number of units	1,600	1,600
Total cost	$105,600	$91,200