Q9SE - Horngren'S Financial And Managerial Accounting

Question

Computing inventory balances 

Zeng Company reports the following data: 

Finished Goods Inventory: 

Beginning balance, in units                  300 Units 

Produced                                              2,900 

Units sold                                            (1,600) 

Ending balance, in units                     1,600 

Production Costs: Variable manufacturing costs per unit $ 57

Total fixed manufacturing costs 26,100 

Calculate the product cost per unit and the total cost of the 1,600 units in ending inventory using absorption costing and variable costing.                                                       

 

Step-by-Step Solution

Answer

Answer

 

• Total unit product cost under absorption and variable costings are $66 and $57 respectively.
• Total cost of 1,600 units under absorption and variable costings is $105,600 and $91,200 respectively.

 

Step 1: Calculation of unit product cost using absorption and variable costing

Particulars	Absorption Costing	Variable Costing
Variable manufacturing cost per unit	$57	$57
Total fixed manufacturing costs ($26,100/2,900)	$9	-
Total unit product cost	$66	$57

Step 2: Calculation of total cost of the 1,600 units in ending inventory using absorption and variable costing

Particulars	Absorption Costing	Variable Costing
Total unit product cost	$66	$57
Number of units	1,600	1,600
Total cost	$105,600	$91,200