Exercise 7-1 Variable and Absorption Costing Unit Product Costs [LO7-1 Ida Sidha

Question

Exercise 7-1 Variable and Absorption Costing Unit Product Costs [LO7-1 Ida Sidha Karya Company is a family-owned company located 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 $818. 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 units 23,000 21,000 2,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $230 $360 21 Pixed costsr Pixed manufacturing overhead Pixed selling and administrative $760,000 $790,000 Required 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan. 1. Absorption costing unit product cost 2. Variable costing unit product cost

Explanation / Answer

1 Absorprtion costing Product cost Direct material 230 Direct labor 360 Variable manufacturing overhead 55 Fixed manufacturing 33 (760000/23000) Product cost per unit 678 2 Variable costing Direct material 230 Direct labor 360 Variable manufacturing overheads 55 Product cost per unit 645

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