Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city’s crowded streets that it sells for 717 rupees. (Indian currency is denominated in rupees, denoted by Picture.) Selected data for the company’s operations last year follow:
Units in beginning inventory 0
Units produced 21,000
Units sold 19,000
Units in ending inventory 2,000
Variable costs per unit:
Direct materials Picture 140
Direct labor Picture 370
Variable manufacturing overhead Picture 47
Variable selling and administrative Picture 23
Fixed costs:
Fixed manufacturing overhead Picture 850,000
Fixed selling and administrative Picture 730,000
Required:
1.
Assume that the company uses absorption costing. Compute the unit product cost for one bicycle. (Round your intermediate and final answers to the nearest whole number. Omit the "Picture" sign in your response.)
Unit product cost Picture
2.
Assume that the company uses variable costing. Compute the unit product cost for one bicycle. (Omit the "Picture" sign in your response.)
Unit product cost Picture
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To calculate the unit product cost under absorption costing, we need to add up all the variable costs and allocate the fixed costs over the number of units produced.
1. Calculate the total variable cost per unit:
Variable cost per unit = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative
Variable cost per unit = 140 + 370 + 47 + 23
2. Calculate the fixed cost per unit:
Fixed cost per unit = (Fixed manufacturing overhead + Fixed selling and administrative) / Units produced
Fixed cost per unit = (850,000 + 730,000) / 21,000
3. Calculate the unit product cost:
Unit product cost = Variable cost per unit + Fixed cost per unit
To calculate the unit product cost under variable costing, we only consider the variable costs per unit.
1. The variable cost per unit is already calculated as 140 + 370 + 47 + 23.
Note: In both cases, remember to omit the "Picture" sign when providing the final answers.