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 $839. Selected data for the company’s operations last year follow:

  

1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan.(Round your intermediate calculations and final answer to nearest whole dollars.)
Unit product cost_________________

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

Units in beginning inventory 0 Units produced 17,000 Units sold 14,000 Units in ending inventory 3,000 Variable costs per unit: Direct materials $     160 Direct labor $     480 Variable manufacturing overhead $      51 Variable selling and administrative $      20 Fixed costs: Fixed manufacturing overhead $ 820,000 Fixed selling and administrative $ 480,000

Explanation / Answer

1. Unit product cost: $739

2. Unit product cost: $691

Calculations:

Unit product cost Absorption costing Variable costing Direct materials 160 160 Direct labor 480 480 Variable manufacturing overhead 51 51 Fixed manufacturing overhead ($820000/17000) 48 0 Unit product cost $ 739 691

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