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 S891. Selected data for the company's operations last year follow Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 17,000 13,000 4,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 150 $ 500 S 65 $ 21 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative S 950,000 S 410,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. it product cost 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan. it product cost

Explanation / Answer

1) absorption costing :-

Direct material = $150

+ Direct labor = $ 500

+ Variable manufacturing OH = $65

+. Fixed manufacturing OH = $55.88 ( $950000/17000)

Total = $770.88

2) variable costing :-

Direct material . = $150

+ Direct labor = .$500

+ Variable manufacturing OH . =. $65

Total = $ 715

Note :- the selling and administrative expenses are not treated as product cost under either absorption or variable costing .

These expenses are always treated as product cost

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