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Answer:
Instructions are listed below
Explanation:
Giving the following information:
Easton Pump Company’s planned production for the year just ended was 19,100 units.
This production level was achieved, and 21,500 units were sold.
Other data:
Direct material used $ 574,910
Direct labor incurred 276,950
Fixed manufacturing overhead 399,190
Variable manufacturing overhead 191,000
Fixed selling and administrative expenses 324,700
Variable selling and administrative expenses 117,465
Finished-goods inventory, January 1= 3,300 units
Finished goods inventory= beginning inventory + production during period - sales
Finished goods inventory= 3300 + 19100 - 21500= 900 units
A) variable costing:
Cost per unit= (direct materials + direct labor + variable manufacturing overhead)/units produced
cost per unit= (574910+276950+191000)/19100
cost per unit= $54.6
B) Absorption costing would have a lower operating income because the fixed manufacturing overhead costs are distributed among the units produced. Therefore some of the fixed costs are taken by the units produced but not sold. They are in inventory.
C) Variable costing:
Variable costs=
Direct material used $ 574,910
Direct labor incurred 276,950
Variable manufacturing overhead 191,000
Variable selling and administrative expenses 117,465
Total variable costs= $1160325
Fixed costs:
Fixed manufacturing overhead 399,190
Fixed selling and administrative expenses 324,700
Total fixed costs= $723890
Total cost of the period= $1,884,215
Absorption method:
Costs of production per unit= (direct material + direct labor + total manufacturing overhead)/units produced
Cost of production per unit= (574,910 + 276,950 + 191,000 + 399,190 )/19100= $75.5
COGS= (75.5*21500)= 1,623,250
Total administrative and selling costs= (324,700+ 117,465)= 442,165
Total costs= $2,065,415
The finished goods inventory cost is $49140.
How to calculate the finished goods inventory cost?
The number of units remaining on closing stock will be:
= Opening inventory + Production- Sales
= 3300 + 19100 - 21500
= 900
Then, the cost per unit variable cost will be:
= ($574,910 + $276,950 + $191,000) / 19100
= $54.60 per unit.
Therefore, the finished goods inventory cost will be:
= 900 × $54.60
= $49140
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