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7 December, 02:28

Vaughn Manufacturing sells its product for $90 per unit. During 2019, it produced 60000 units and sold 50000 units (there was no beginning inventory). Costs per unit are: direct materials $24, direct labor $14, and variable overhead $3. Fixed costs are: $720000 manufacturing overhead, and $90000 selling and administrative expenses. Cost of goods sold under absorption costing is

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  1. 7 December, 02:41
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    Inventory = $530,000

    Explanation:

    Giving the following information:

    Vaughn Manufacturing sells its product for $90 per unit. During 2019, it produced 60000 units and sold 50000 units (there was no beginning inventory).

    Costs per unit:

    direct materials $24

    direct labor $14

    variable overhead $3.

    Fixed costs are:

    $720000 manufacturing overhead

    Manufacturing cost under absorption costing = direct material + direct labor + variable manufacturing overhead + fixed manufacturing overhead

    Manufacturing cost under absorption costing = 24 * 60,000 + 14*60,000 + 3*60,000 + 720,000 = $3,180,000

    Unitary cost = 3,180,000/60,000 = $53

    Inventory = 53*10,000 = $530,000
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