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 $15 per unit
Direct labor $16 per unit
Overhead costs for the year
Variable overhead $80,000 per year
Fixed overhead $160,000 per year
Units produced this year 20,000 units
Units sold this year 14,000 units
Ending finished goods inventory
in units 6,000 units
1. Compute the cost per unit using absorption costing
Cost per unit of finished goods using: Absorption costing
Cost per unit of finished goods
2. Determine the cost of ending finished goods inventory using absorption costing.
Cost per unit of finished goods using: Absorption costing
Number of units in finished goods
Total cost of finished goods inventory
3. Determine the cost of goods sold using absorption costing
Cost per unit of goods sold using: Absorption costing
Number of units in sold goods
Total cost of sold goods

Answer 1

a. $43

b. $258,000

c. $602,000

Step-by-step explanation:

Variable overhead per unit = Variable overhead / Units produced this year

Variable overhead per unit = $80,000 / 20,000

Variable overhead per unit = $4

Fixed overhead per unit = Fixed overhead / Units produced this year

Fixed overhead per unit = $160,000/ 20,000

Fixed overhead per unit = $8

a. Cost per unit of finished goods using Absorption costing

Direct material per unit $15

Direct labor per unit $16

Variable overhead per unit $4

Fixed overhead per unit $8

Cost per unit of finished goods $43

b. Number of units in finished goods = 6,000

Total cost of finished goods inventor = $43 * 6,000 units = $258,000

c. Number of units in sold goods 14,000

Total cost of finished goods inventory = $43 * 14,000 units = $602,000