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 $850 Selected data for the company\'s operations last year follow: beginning inventory Units in Units produced Units sold Units in ending inventory Variable costs per unit: 250 225 25 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 100 320 40 20 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative $60,000 20,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one gamelan 2. Assume that the company uses variable costing. Compute the unit product cost for one gamelan. Absorption costing unit product cost 2. Variable costing unit product cost

Solution

Answer 1.

Unit Production Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead per unit produced
Unit Production Cost = $100 + $320 + $40 + $60,000/250
Unit Production Cost = $460 + $240
Unit Production Cost = $700

Answer 2.

Unit Production Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead
Unit Production Cost = $100 + $320 + $40
Unit Production Cost = $460