Question

Trio company reports the following information for the current year, which is its first year of operation

Answer 1

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