Explanation:
1. The computation of cost per unit using a absorption costing
Fixed cost
= Fixed manufacturing overhead ÷ Units produced
= $160,000 ÷ 20,000
= $8
Variable costs
Direct material per unit $15
Direct labor per unit $16
Variable manufacturing overhead per unit
= Variable overhead ÷ Units produced
= (80,000 ÷ 20,000)
= $4
Total Variable cost per unit
= $15 + $16 + $4
= $35
Total cost per unit
= $8 + $35
= $43
The computation of cost per unit using a variable costing
Direct material per unit $15
Direct labor per unit $16
Variable manufacturing overhead per unit $4
= $15 + $16 + $4
= $35
2. The computation of ending finished goods inventory using absorption costing
Number of finished goods in units 6,000
Cost of goods in ending inventory
= 6000 × $43
= $258,000
The computation of ending finished goods inventory using variable costing
= Number of finished goods in units 6,000
Cost of goods in ending inventory
= 6,000 × $35
= $210,000
3. The computation of the cost of goods sold using absorption costing
Number of units in sold goods 14,000
Cost of goods sold
= 14,000 × $43
= $602,000
The computation of the cost of goods sold using variable costing
Number of units in sold goods 14,000
Cost of goods sold
= 14,000 × $35
= $490,000
