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 54,600Required: 1. Calculate the unit cost for each of these four costs. Round your answers to the nearest cent. Direct Materials Cost $ Direct Labor Cost $ Variable Overhead Cost $ Fixed Overhead Cost $ 2. Calculate the cost of one unit of product under absorption costing. Round your answer to the nearest cent. $ 3. How many units are in ending inventory? $ 4. Calculate the cost of ending inventory under absorption costing. $

Answer 1

Answer:

Required 1

Direct Materials Cost = $4.00

Direct Labor Cost = $5.07

Variable Overhead Cost = $0.78

Fixed Overhead Cost = $2.73

Required 2

Unit Cost =  $12.58

Required 3

Units in Ending Inventory = 1,100

Required 4

Cost of ending inventory  = $13,838

Explanation:

Unit Cost Calculations :

Direct materials = $ 80,000  ÷ 20,000 units

                          = $4.00

Direct labor = $101,400 ÷ 20,000 units

                   = $5.07

Variable overhead = $15,600 ÷ 20,000 units

                               = $0.78

Fixed overhead = $54,600 ÷ 20,000 units

                           = $2.73

Unit Cost (Absorption Costing) = All Manufacturing Costs

                                                   = $4.00 + $5.07 + $0.78 + $2.73

                                                   = $12.58

Units in Ending Inventory = Opening Inventory Units + Production - Sales

                                          = 0 + 20,000 units - 18,900 units

                                          = 1,100

Cost of ending inventory  = Unit Cost × Units in Ending Inventory

                                           = $12.58 × 1,100

                                           = $13,838