EXERCISE 6–1 Variable and Absorption Costing Unit Product Costs LO6–1 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 $850. Selected data for the company’s operations last year follow: Units in beginning inventory . . . . . . . . . . . . . . . . . . . 0 Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 Units sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Units in ending inventory . . . . . . . . . . . . . . . . . . . . . 25 Variable costs per unit: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $100 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $320 Variable manufacturing overhead . . . . . . . . . . . $40 Variable selling and administrative . . . . . . . . . . $20 Fixed costs: Fixed manufacturing overhead . . . . . . . . . . . . . . $60,000 Fixed selling and administrative . . . . . . . . . . . . . $20,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan.
EXERCISE 6–1 Variable and Absorption Costing Unit Product Costs LO6–1
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 $850. Selected data for
the company’s operations last year follow:
Units in beginning inventory . . . . . . . . . . . . . . . . . . . 0
Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Units sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Units in ending inventory . . . . . . . . . . . . . . . . . . . . . 25
Variable costs per unit:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $100
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $320
Variable manufacturing
Variable selling and administrative . . . . . . . . . . $20
Fixed costs:
Fixed manufacturing overhead . . . . . . . . . . . . . . $60,000
Fixed selling and administrative . . . . . . . . . . . . . $20,000
Required:
1. Assume that the company uses absorption costing. Compute the unit product cost for one
gamelan.
2. Assume that the company uses variable costing. Compute the unit product cost for one
gamelan.
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