Ida Sidha Karya Company is a family-owned company located in the village of Gian

Question

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar 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 $769. Selected data for the company’s operations last year follow:

Assume that the company uses absorption costing. Compute the unit product cost for one gamelan.

     

Assume that the company uses variable costing. Compute the unit product cost for one gamelan.

      

  Units in beginning inventory 0   Units produced 13,000   Units sold 9,000   Units in ending inventory 4,000   Variable costs per unit:        Direct materials $ 180        Direct labor $ 340        Variable manufacturing overhead $ 61        Variable selling and administrative $ 22   Fixed costs:        Fixed manufacturing overhead $ 620,000        Fixed selling and administrative $ 680,000

Explanation / Answer

Question - 1 ...Assume that the company uses absorption costing. Compute the unit product cost for one gamelan.

Question - 2

Under variable costing approach.... product cost is determined @ of variable cost only.

Under variable costing approach.......... fixed costs are treated as period cost and not fixed cost.

Materials 180 Labor 340 Variable Manufacturing OH 61 Fixed MOH = 620000/13000 47.69 Unit product cost 628.69

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