Crate Express Co. produces wooden crates used for shipping products by ocean lin

Question

Crate Express Co. produces wooden crates used for shipping products by ocean liner. In 2017, Crate Express incurred the following costs.

Assume Crate Express used an average 800 kilowatt-hours each month over the past year.

(a) What is Crate Express's total manufacturing cost if it uses a variable costing approach?

(b) What is Crate Express's total manufacturing cost if it uses an absorption costing approach?

Wood used in crate production $56,000 Nails (considered insignificant and a variable expense) $540 Direct labor $40,600 Utilities for the plant:     $1,300 each month,     plus $0.60 for each kilowatt-hour used each month Rent expense for the plant for the year $25,800

Explanation / Answer

a) Calculate total manufacturing cost using variable costing :

b) Calculate total manufacturing cost using Absorption costing :

Wood used in crate production 56000 Nails (considered insignificant and a variable expense) 540 Direct labour 40600 Utilities expense (800*.60) 480 Total manufacturing cost 97620

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