Question

skywalk corporation reports the following first year production cost information.units produced 62,000 unitsunits sold59,000unitsdirect labor$ 41per unitdirect materials $ 15per unitvariable overhead $ 150per unitfixed overhead $ 4,340,000 in totala. compute product cost per unit under variable costing.b. compute product cost per unit under absorption costing.c. determine the cost of ending inventory using variable costing.d. determine the cost of ending inventory using absorption costing.

Answer 1

Under variable costing, the product cost per unit is $206, while under absorption costing, it is $276.13. The cost of ending inventory is $618,000 under variable costing and $828,390 under absorption costing.

Step-by-step explanation:

a. To compute the product cost per unit under variable costing, we need to sum up the direct labor, direct materials, and variable overhead per unit. The product cost per unit under variable costing would be $41 + $15 + $150 = $206 per unit.

b. To compute the product cost per unit under absorption costing, we need to add the fixed overhead to the product cost per unit under variable costing.

So, the product cost per unit under absorption costing would be $206 + ($4,340,000 / 62,000) = $276.13 per unit.

c. To determine the cost of ending inventory using variable costing, we multiply the number of units in ending inventory by the product cost per unit under variable costing.

So, the cost of ending inventory using variable costing would be 3,000 units x $206 = $618,000.

d. To determine the cost of ending inventory using absorption costing, we again multiply the number of units in ending inventory by the product cost per unit under absorption costing.

So, the cost of ending inventory using absorption costing would be 3,000 units x $276.13 = $828,390.