Question

Clear Company reports the following information for its first year of operations: Units produced this year 50,000 units Units sold this year 49,000 units Direct materials $7 per unit Direct labor $3 per unit Variable overhead $210,000 in total Fixed overhead ? in total If the company's cost per unit of finished goods using absorption costing is $19.30, what is total fixed overhead?

Answer 1

Step-by-step explanation:

The question is not complete. The company's cost per unit of finished goods was not added in the given data. The solution below is for $19.30 of company's cost per unit. The formula used is applicable to any unit cost given to you.

The answer is option (B) $255,000

Step-by-step explanation:

Solution:

Given Data;

Units of goods Produced = 50,000

Units of goods sold = 49,000

Direct materials = $7

Direct labor = $3

Variable overhead = $210,000

Cost per unit of finished goods $19.30 ( added value)

Step 1: Calculating the total excluding fixed overhead;

Total excluding fixed overhead =

variable overhead + direct materials + direct labor---------1

Substituting the given values into equation 1, we have

Total excluding fixed overhead = (210,000/50000) + 7 + 3

= 4.2 +7+3

=$14.2

Step 2: Calculating fixed overhead of company's per unit goods;

Fixed overhead per unit= Total cost per unit of finished goods - Total

excluding fixed overhead -----------------2

Substituting into equation 2, we have

Fixed overhead per unit = 19.3 -14.2

= $5.1 ( for 1 unit)

Step 3: Calculating the total fixed over head;

Total fixed overhead = Units produced × Fixed overhead per unit------3

Substituting into equation 3, we have

Total fixed overhead = 50,000 × 5.1

= $255,000

Answer 2

$255,000

Step-by-step explanation:

Total excluding fixed overhead:

= Direct materials + Direct labor + Variable overhead

= $7 + $3 + ($210,000 ÷ 50,000)

= $7 + $3 + $4.2

= $14.2

Total cost per unit of finished goods = $19.3

Fixed overhead per unit:

= Total cost per unit of finished goods - Total excluding fixed overhead

= $19.3 - $14.2

= $5.1 per unit

Total fixed overhead:

= Units produced × Fixed overhead per unit

= 50,000 × $5.1

= $255,000