Question

Crane Company sells its product for $60 per unit. During 2019, it produced 48000 units and sold 40000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $576000 manufacturing overhead, and $72000 selling and administrative expenses. Under absorption costing, what amount of fixed overhead is deferred to a future period?

Answer 1

$96,000

Step-by-step explanation:

The computation of the amount of fixed overhead is deferred to a future period is shown below:

= Unsold units × fixed overhead cost per unit

= 8,000 units × ($576,000 ÷ 48,000 units)

= 8,000 units × $12

= $96,000

The unsold units is

= Produced units - sold units

= 48,000 units - 40,000 units

= 8,000 units

By multiplying the unsold units with the fixed overhead cost per unit we can get the amount of fixed overhead deferred for a future period and the same is to be considered