13-B3 Comparison of Variable Costing and Absorption Costing Consider the followi

Question

13-B3 Comparison of Variable Costing and Absorption Costing
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:

Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800

There are no work-in-process inventories.

1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable costing?

Explanation / Answer

Particulars

$

Particulars $ Direct labor per unit (4,200 / 1,600) 2.625 Direct material per unit (3,500 / 1,600) 2.1875 Variable manufacturing cost per unit (300 / 1,600) 0.1875 Fixed manufacturing cost per unit (2,200 / 1,600) 1.375 Total cost per unit 6.3

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