“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

ekkarill92 answered 2 years ago

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