Question

Computing unit and inventory costs under absorption costing LO P1

Trio Company reports the following information for the current year, which is its first year of operations.
Direct materials $ 13 per unit
Direct labor $ 17 per unit
Overhead costs for the year $100,000 per year
Variable overhead 200,000 per year
Fixed overhead Units produced this year 25,000 units
Units sold this year 19,000 units
Ending finished goods inventory in units 6,000 units
Compute the cost per unit using absorption costing Cost per unit of finished goods using: Absorption costing Cost per unit of finished goods
Determine the cost of ending finished goods inventory using absorption costing

Answer 1

Unitary production cost= $42

Ending inventory= $252,000

Step-by-step explanation:

Giving the following information:

Direct materials $ 13 per unit

Direct labor $ 17 per unit

Fixed overhead costs for the year= $100,000 per year

Variable overhead= 200,000 per year

Units produced this year 25,000 units

Ending finished goods inventory in units 6,000 units

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

First, we need to calculate the unitary fixed and variable cost:

Unitary overhead= (100,000 + 200,000)/25,000= $12

Unitary production cost= 13 + 17 + 12= $42

COGS= 19,000*42= $798,000

Ending inventory= 6,000*42= $252,000