Question

Inventory Valuation under Absorption Costing Amiens Company produced 20,000 units during its first year of operations and sold 18,900 at $17 per unit. The company chose practical activity—at 20,000 units—to compute its predetermined overhead rate. Manufacturing costs are as follows:
Direct materials $ 80,000
Direct labor 101,400
Variable overhead 15,600
Fixed overhead 54,600
a. Calculate the unit cost for each of these four costs. Round your answers to the nearest cent.
b. Calculate the cost of one unit of product under absorption costing. Round your answer to the nearest cent.
c. How many units are in ending inventory?
d. Calculate the cost of ending inventory under absorption costing.

Answer 1

Answer:

a. Calculate the unit cost for each of these four costs. Round your answers to the nearest cent.

Direct materials= $4 / unit

Direct labor= $5.07 / unit

Variable overhead = $0.78 / unit

Fixed overhead = $2.73 / unit

b. Calculate the cost of one unit of product under absorption costing. Round your answer to the nearest cent.

$12.58

c. How many units are in ending inventory?

2,000 units

d. Calculate the cost of ending inventory under absorption costing.

$25,160

Explanation:

a.

No. of unit produced = 20,000

Direct materials = 80,000 / 20,000 = $4 / unit

Direct labor = 101,400  / 20,000 = $5.07 / unit

Variable overhead = 15,600  / 20,000 = $0.78 / unit

Fixed overhead = 54,600 / 20,000 = $2.73 / unit

b.

Cost of one unit of product = 4+5.07+0.78+2.73 = $12.58

c.

Closing inventory = 20,000-18,000 = 2,000 units

d.

Cost of ending inventory = 2,000 x 12.58 = $25,160