nventory Valuation under Absorption and Variable Costing Overton Company produce

Question

nventory Valuation under Absorption and Variable Costing

Overton Company produced 80,000 units last year. The company sold 79,000 units and there was no beginning inventory. The company chose practical activity—at 80,000 units—to compute its predetermined overhead rate. Manufacturing costs are as follows:

Required:

1. Calculate the cost of one unit of product under absorption costing. Round your interim calculations and final answer to the nearest cent.
$ per unit

2. Calculate the cost of one unit of product under variable costing. Round your interim calculations and final answer to the nearest cent.
$ per unit

3. Calculate the cost of ending inventory under absorption costing.
$

4. Calculate the cost of ending inventory under variable costing.
$

Explanation / Answer

1 Direct materials 8.49 Direct labor 1.48 Variable overhead 1.25 Fixed overhead 3.26 Unit product cost 14.48 2 Direct materials 8.49 Direct labor 1.48 Variable overhead 1.25 Unit product cost 11.22 3 Cost of ending inventory =1000*14.48= 14480 4 Cost of ending inventory =1000*11.22= 11220

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