Exercise 7-1 Variable and Absorption Costing Unit Product Costs [LO7-1] Ida Sidh

Question

Exercise 7-1 Variable and Absorption Costing Unit Product Costs [LO7-1] Ida Sidha Karya Company is a family-owned company located on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $989. Selected data for the company's operations last year follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 16,000 14,000 2,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 240 510 58 18 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative $ 820,000 $680,000 Required 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan. 1. Absorption costing unit product cost 2. Variable costing unit product cost

Explanation / Answer

1 Direct materials 240 Direct labor 510 Variable manufacturing overhead 58 Fixed manufacturing overhead 51 =820000/16000 Absorption costing unit product cost 859 2 Direct materials 240 Direct labor 510 Variable manufacturing overhead 58 Variable costing unit product cost 808

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