Else Corporation has provided the following data for its two most recent years of operation:?Manufacturing costs:??Variable manufacturing cost per unit produced:??Direct materials$10?Direct labor$7?Variable manufacturing overhead$3?Fixed manufacturing overhead per year$216,000?Selling and administrative expenses:??Variable selling and administrative expense per unit sold$6?Fixed selling and administrative expense per year$72,000??Year 1Year 2?Units in beginning inventory01,000?Units produced during the year9,00012,000?Units sold during the year8,0009,000?Units in ending inventory1,0004,000Required:a. Assume the company uses absorption costing. Compute the unit product cost in each year.b. Assume the company uses variable costing. Compute the unit
product cost in each year.
What will be an ideal response?
a. Absorption costing unit product costs:
| ? | ? | Year 1 | Year 2 |
| ? | Direct materials | $10 | $10 |
| ? | Direct labor | 7 | 7 |
| ? | Variable manufacturing overhead | 3 | 3 |
| ? | Fixed manufacturing overhead ($216,000 ÷ 9,000 units produced; $216,000 ÷ 12,000 units produced) | 24 | 18 |
| ? | Absorption costing unit product cost | $44 | $38 |
b. Variable costing unit product costs:
| ? | ? | Year 1 | Year 2 |
| ? | Direct materials | $10 | $10 |
| ? | Direct labor | 7 | 7 |
| ? | Variable manufacturing overhead | 3 | 3 |
| ? | Variable costing unit product cost | $20 | $20 |
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What will be an ideal response?
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