Ida Sidha Karya Company is a familyowned company located in

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $903. Selected data for the company\'s operations last year follow Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 16,000 3,000 3,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative S 250 $ 430 S 60 S 19 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative $690,000 $ 860,000 Required 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan. Unit product cost 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelar. Unit product cost

Solution

1. ALL MANUFACTURING COSTS(FIXED AND VARIABLE) ARE INCLUDED IN PRODUCT COSTS UNDER ABSORPTION COSTING

2.ONLY VARIABLE MANUFACTURING COSTS ARE INCLUDED IN PRODUCT COSTS UNDER VARIABLE COSTING

DIRECT MATERIALS	$250
DIRECT LABOUR	$430
VARIABLE MANUFACTURING OVERHEAD	$60
FIXED MANUFACTURING OVERHEAD($690,000/16000UNITS)	$43
UNIT PRODUCT COST	$783