Unit Costs, Inventory Valuation, Variable and Absorption CostingSnyder Company produced 89,800 units during its first year of operations and sold 86,900 at $22.26 per unit. The company chose practical activity—at 89,800 units—to compute its predetermined overhead rate. Manufacturing costs are as follows:Direct materials$522,636Direct labor102,372Expected and actual variable overhead379,854Expected and actual fixed overhead491,206Required:If required, round unit cost answers to the nearest cent.1. Calculate the unit cost and the cost of finished goods inventory under absorption costing.Unit Cost$fill in the blank 1Cost of finished goods inventory$fill in the blank 22. Calculate the unit cost and the cost of finished goods inventory under variable costingUnit Cost$fill in the blank 3Cost of finished goods inventory$fill in the blank 4

Absorption Costing Method :— In this method, product cost is the sum of direct material, direct labour, variable manufacturing overhead and fixed manufacturing overhead. Variable Costing Method :— In this method, product cost is the sum of direct material, direct labour and variable manufacturing overhead. Unit Cost :— It is calculated by dividing total manufacturing cost by unit produced during the period. Working Note #1:— Using Absorption Costing Method Total Product Cost or Cost of Goods Manufactured = Direct Material Cost + Direct Labour Cost + Variable Manufacturing Overhead + Fixed Manufacturing Overhead = $522,636 + $102,372 + $379,854 + $491,206 = $1,496,068 Unit Product Cost or Unit Cost = Total Product Cost/Units produced = $1,496,068/89,800 = $16.66 Units of Finished Goods Ending Inventory = Beginning Inventory + Units Produced — Units sold = 0 + 89,800 — 86,900 = 2,900 Cost of Finished Goods Inventory = Ending Finished Goods Inventory × Unit Cost = 2,900 × $16.66 = $48,314 Working Note #2:— Using Variable Costing Method Total Product Cost or Cost of Goods Manufactured = Direct Material Cost + Direct Labour Cost + Variable Manufacturing Overhead = $522,636 + $102,372 + $379,854 = $1,004,862 Unit Product Cost or Unit Cost = Total Product Cost/Units produced = $1,004,862/89,800 = $11.19 Cost of Finished Goods Inventory = Ending Finished Goods Inventory × Unit Cost = 2,900 × $11.19 = $32,451 Requirement #1:— Unit Cost $16.66 Cost of finished goods inventory $48,314 Requirement #2:— Unit Cost $11.19 Cost of finished goods inventory $32,451

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Unit Costs, Inventory Valuation, Variable and Absorption Costing

Snyder Company produced 89,800 units during its first year of operations and sold 86,900 at $22.26 per unit. The company chose practical activity—at 89,800 units—to compute its predetermined overhead rate. Manufacturing costs are as follows:

Direct materials	$522,636
Direct labor	102,372
Expected and actual variable overhead	379,854
Expected and actual fixed overhead	491,206

Required:

If required, round unit cost answers to the nearest cent.

1. Calculate the unit cost and the cost of finished goods inventory under absorption costing.

Unit Cost	$fill in the blank 1
Cost of finished goods inventory	$fill in the blank 2

2. Calculate the unit cost and the cost of finished goods inventory under variable costing

Unit Cost	$fill in the blank 3
Cost of finished goods inventory	$fill in the blank 4

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