Computing unit and inventory costs under absorption costing LO P1

Trio Company reports the following information for the current year, which is its first year of operations.

Direct materials $ 13 per unit

Direct labor $ 17 per unit

Overhead costs for the year $100,000 per year

Variable overhead 200,000 per year

Fixed overhead Units produced this year 25,000 units

Units sold this year 19,000 units

Ending finished goods inventory in units 6,000 units

Compute the cost per unit using absorption costing Cost per unit of finished goods using: Absorption costing Cost per unit of finished goods

Determine the cost of ending finished goods inventory using absorption costing

Unitary production cost = $42

Ending inventory = $252,000

Explanation:

Giving the following information:

Direct materials $ 13 per unit

Direct labor $ 17 per unit

Fixed overhead costs for the year = $100,000 per year

Variable overhead = 200,000 per year

Units produced this year 25,000 units

Ending finished goods inventory in units 6,000 units

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

First, we need to calculate the unitary fixed and variable cost:

Unitary overhead = (100,000 + 200,000) / 25,000 = $12

Unitary production cost = 13 + 17 + 12 = $42

COGS = 19,000*42 = $798,000

Ending inventory = 6,000*42 = $252,000