Sprinkle Co. sells its product for $20 per unit. During 2013, it produced 60,000

Question

Sprinkle Co. sells its product for $20 per unit. During 2013, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $5, direct labor $3, and variable overhead $1. Fixed costs are: $240,000 manufacturing overhead, and $30,000 selling and administrative expenses. Cost of goods sold under absorption costing is: A. $450,000 B. $540,000 C. $650,000 D. $520,00 Ending inventory under variable costing is A. $90,000 B. $130,000 C. $200,000 D. $450,000 Under absorption costing, what amount of fixed overhead is deferred to future period? A. $10,000 B. $40,000 C. $50,000 D. $240,000

Explanation / Answer

Cost of goods sold under absorption costing is:
50000 x (9 + 240000/60000) = $650000

(C) is the answer

Ending inventory under variable costing

(60000 - 50000) x 9 = $90000

(A) is the answer

Under absorption costing, what amount of fixed overhead is deferred to future period?

10000 x $4 = $40000

(B) is the answer.

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