Gourmet Food Company sell its product for 60 per unit During

Gourmet Food Company sell its product for $60 per unit. During 2017, it produced 60,000 units and sold 50,000 units (there was no beginning inventory or BI= 0). Costs per unit are: direct materials (DM) $15, direct labor (DL) $9, and variable overhead (VOH) $3. Fixed costs are: $720,000 (FOH) manufacturing overhead, and $90,000 (S&A) selling and administrative expenses. 15. Under absorption costing (ABS) , what amount of fixed overhead (FOH) is deferred to a future period?

A) $30,000

B) $120,000

C) $150,000

D) $720,000

Solution

Calculate amount of fixed overhead is deferred to a future period :

Fixed manufacturing overhead cost per unit = 720000/60000*10000 = 120000

So answer is b) $120000