Question

Carolina Corporation, which uses throughput costing, began operations at the start of the current year. Planned and actual production equaled 20,000 units, and sales totaled 17,000 units at $95 per unit. Cost data for the year were as follows: Direct materials (per unit) $ 18 Conversion cost: Direct labor 225,000 Variable manufacturing overhead 335,000 Fixed manufacturing overhead 300,000 Selling and administrative costs (total) 443,000

Required:

A. Compute the company's total cost for the year.

B. How much of this cost would be held in year-end inventory under (1) absorption costing and (2) variable costing?

C. How much of the company's total cost for the year would appear on the period's income statement under (1) absorption costing and (2) variable costing?

Answer 1

A.)	Direct Materials	360,000	=20000*18
	Direct labor	225,000
	Variable Manufacturing overhead	335,000
	Fixed Manufacturing overhead	300,000
	Selling & Administrative costs	443,000
	Company's Total Cost for the year	$ 1,663,000
B.)
(1)	Direct Materials	360,000
	Direct labor	225,000
	Variable Manufacturing overhead	335,000
	Fixed Manufacturing overhead	300,000
	Total Manufacturing Costs	1,220,000
	/ Unit produced	20,000
	Cost per unit	61
	Cost in year end Inventory	$ 183,000	=61*3000
(2)	Direct Materials	360,000
	Direct labor	225,000
	Variable Manufacturing overhead	335,000
	Total Variable Manufacturing Costs	920,000
	/ Unit produced	20,000
	Cost per unit	46
	Cost in year end Inventory	$ 138,000	=46*3000
C.)
(1)	Cost of goods sold	1,037,000	=17000*61
	Add: Selling & administrative cost	443,000
	Total Cost for the year on Income Statement	$ 1,480,000
(2 )	Variable Cost of goods sold	782,000
	Add: Fixed manufacturing overhead	300,000
	Add: Selling & administrative cost	443,000
	Total Cost for the year on Income Statement	$ 1,525,000