Trio Company reports the following information for the current year, which is its first year of operations:
|Direct materials||$12 per unit|
|Direct labor||$19 per unit|
|Overhead costs for the year|
|Variable overhead||$ 45,000 per year|
|Fixed overhead||$ 90,000 per year|
|Units produced this year||22,500 units|
|Units sold this year||16,500 units|
|Ending finished goods inventory in units||6,000 units|
a. Compute the product cost per unit using absorption costing.
b. Determine the cost of ending finished goods inventory using absorption costing.
c. Determine the cost of goods sold using absorption costing.
The variable costing does not include fixed costs as manufacturing cost, the fixed cost is treated as a period cost under the variable costing. The product cost is the sum of variable production costs.
Answer and Explanation:
Requirement a, b & c:
|Computations under Variable costing|
|Per Unit Cost:|
|Variable overhead ($45,000/22,500)||$2.00|
|Total Variable Cost per unit||$33.00|
|Units produced this year||22,500|
|Units sold this year||16,500|
|Ending finished goods inventory in units||6,000|
|a. The product cost per unit||$33.00|
|b. The cost of ending finished goods ($33 x 6,000)||$198,000.00|
|c. The cost of goods sold ($33 x 16,500)||$544,500.00|
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from Financial Accounting: Help and ReviewChapter 13 / Lesson 5