Question

The following information is available for Keller Corporation's new product line:

Selling Price per unit: $15

Variable Manufacturing costs per unit of production : $8

Total annual fixed manufacturing costs : $25,000

Variable administrative costs per unit of production : $3

Total annual fixed selling and administrative expenses : $15,000

There was no inventory at the beginning of the year. During the year 12,500 units were produced and 10,000 units were sold.

a) Determine the cost of ending inventory, assuming Keller uses variable costing.
b) Determine the cost ending inventory, assuming Keller uses absorption costing.

c) Total variable costs charged to expense for the year, assuming variable costing is used, is

d)Total fixed costs charged to expense for the year, assuming absorption costing is used, is

Answer 1

		Unit Cost:	Variable Costing	Absorption Costing		Fixed Manufacturing Cost	25000
		Variable Manufacturing Cost	8.00	8.00		Unit Produced	12500
		Fixed Manufacturing Cost	0.00	2.00		Fixed Manufacturing Cost PU	2.00
		Total Unit Costs	8.00	10.00
	Note:	Selling and Administrative Cost are not part of Unit Costs!
	A	Ending Inventory-Variable Cost:
		Ending Units	2500
		Unit Cost-Variable	8.00
		Ending Inventory-Variable Cost	20000
	B	Ending Inventory-Absorption Cost:
		Ending Units	2500
		Unit Cost-Absorption	10.00
		Ending Inventory-Variable Cost	25000
	C	Total Variable Cost:-Variable Costing:
		Variable Cost of GoodsSold	80000	(10000*8)
		Variable Admin Expes	30000	(10000*3)
		Total Variable Cost:-Variable Costing:	110000
	D	Total Fixed Cost:-Absorption Costing:
		Fixed Cost of GoodsSold	20000	(10000*2)
		Fixed Admin & Selling Cost	15000
		Total Variable Cost:-Variable Costing:	35000