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 $937. 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 11,000   Units sold 8,000   Units in ending inventory 3,000   Variable costs per unit:        Direct materials $ 250        Direct labor $ 440        Variable manufacturing overhead $ 55        Variable selling and administrative $ 15   Fixed costs:        Fixed manufacturing overhead $ 900,000        Fixed selling and administrative $ 690,000

Explanation / Answer

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

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

Direct material 250 Direct labour 440 Variable manufacturing overhead 55 Fixed manufacturing overhead (900000/11000) 81.82 Unit product cost 826.82

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