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Trio Company reports the following information for the current year, which is its first year of...

Question:

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.

Variable 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
Particulars Amount
Per Unit Cost:
Direct materials $12.00
Direct labor $19.00
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


Learn more about this topic:

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Variable Costing: Method, Formula & Advantages

from Financial Accounting: Help and Review

Chapter 13 / Lesson 5
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