In: Accounting
“Mick’sproducts”has prepared the following production budget for the coming year
Normal and budgeted capacity 10,000 units
Directmaterial $120000
Directlabour $70000
Variable factory overhead $ 30 000
Fixed factory overhead $ 20 000
Require
Calculate the budgeted unit cost of production using absorption costing and direct costing
“Mick” sales for the year were 8,000 units and production was 10,000 units as budgeted
Calculate ending inventory
Budgeted unit cost :
Absorption costing | Direct Costing | |
Direct material | 120000 | 120000 |
Direct labour | 70000 | 70000 |
Variable factory overhead | 30000 | 30000 |
Fixed factory overhead | 20000 | |
Total | 240000 | 220000 |
Units | 10000 | 10000 |
Unit cost | 24 | 22 |
Calculate ending inventory
Absorption costing = 24*2000 = $48000
Direct costing = 22*2000 = $44000