Question

In: Accounting

“Mick’sproducts”has prepared the following production budget for the coming year Normal and budgeted capacity                10,000...

“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

Solutions

Expert Solution

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


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