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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 $ 9.50 per unit
Direct labor $ 10.50 per unit
Overhead costs for the year
Variable overhead $ 185,350 per year
Fixed overhead $ 260,000 per year
Units produced this year 33,700 units
Units sold this year 25,500 units
Ending finished goods inventory in units 8,200 units

a. Compute the product cost per unit using variable costing.

b. Determine the cost of ending finished goods inventory using variable costing.

c. Determine the cost of goods sold using variable costing.

Variable Costing:

Under the variable costing method, the cost of goods sold and the ending inventory is valued the variable cost of production. Unlike absorption costing, variable costing do not include the fixed manufacturing cost as the product cost.

Answer and Explanation:

Requirement a, b, & c:

Computations under Variable costing
Particulars Amount
Per Unit Cost:
Direct materials $9.50
Direct labor $10.50
Variable overhead ($185,350/33,700) $5.50
Total Variable Cost per unit $25.50
Units produced this year 33,700 units
Units sold this year 25,500 units
Ending finished goods inventory in units 8,200 units
a. The product cost per unit $25.50
b. The cost of ending finished goods ($25.50 x 8,200) $209,100.00
c. The cost of goods sold ($25.50 x 25,500) $650,250.00


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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