Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city’s crowded streets that it sells for 767 rupees. (Indian currency is denominated in rupees, denoted by R.) Selected data for the company’s operations last year follow:
Units in beginning inventory 0
Units produced 17,000
Units sold 14,000
Units in ending inventory 3,000
Variable costs per unit:
Direct materials R 120
Direct labor R 400
Variable manufacturing overhead R 65
Variable selling and administrative R 25
Fixed costs:
Fixed manufacturing overhead R 880,000
Fixed selling and administrative R 680,000
Assume that the company uses absorption costing. Compute the unit product cost for one bicycle
Well, let me get my calculator and clown wig on for this one!
To calculate the unit product cost for one bicycle, we need to consider both variable and fixed costs.
First, let's calculate the total variable costs per unit:
Direct materials: R 120
Direct labor: R 400
Variable manufacturing overhead: R 65
Variable selling and administrative: R 25
Total variable costs per unit = R 120 + R 400 + R 65 + R 25 = R 610
Next, let's calculate the total fixed costs:
Fixed manufacturing overhead: R 880,000
Fixed selling and administrative: R 680,000
Total fixed costs = R 880,000 + R 680,000 = R 1,560,000
Now, let's calculate the total manufacturing cost per unit:
Total variable costs per unit + (Fixed manufacturing overhead / Units produced)
R 610 + (R 1,560,000 / 17,000) = R 610 + R 91.76 ≈ R 701.76
Finally, we have the unit product cost for one bicycle:
R 701.76
So, the unit product cost for one bicycle is approximately R 701.76. Keep in mind, I'm a clown bot, so don't take my calculations too seriously!
To compute the unit product cost for one bicycle using absorption costing, we need to calculate the total cost per unit.
1. Calculate the total variable cost per unit:
Variable cost per unit = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative costs
= R120 + R400 + R65 + R25
= R610
2. Calculate the total fixed cost per unit:
Fixed cost per unit = (Fixed manufacturing overhead + Fixed selling and administrative costs) / Units produced
= (R880,000 + R680,000) / 17,000
= R102.94
3. Calculate the unit product cost:
Unit product cost = Total variable cost per unit + Total fixed cost per unit
= R610 + R102.94
= R712.94
Therefore, the unit product cost for one bicycle using absorption costing is R712.94.
To compute the unit product cost for one bicycle using absorption costing, we need to consider both variable costs and fixed costs.
Variable costs per unit:
- Direct materials: R 120
- Direct labor: R 400
- Variable manufacturing overhead: R 65
- Variable selling and administrative: R 25
To calculate the total variable cost per unit, add up all the variable costs:
Total Variable Cost per unit = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative
Total Variable Cost per unit = R 120 + R 400 + R 65 + R 25
Total Variable Cost per unit = R 610
Fixed costs:
- Fixed manufacturing overhead: R 880,000
- Fixed selling and administrative: R 680,000
To calculate the total fixed cost per unit, divide the total fixed costs by the number of units produced:
Total Fixed Cost per unit = (Fixed manufacturing overhead + Fixed selling and administrative) / Units produced
Total Fixed Cost per unit = (R 880,000 + R 680,000) / 17,000
Total Fixed Cost per unit = R 1,560,000 / 17,000
Total Fixed Cost per unit = R 91.76
Unit product cost:
Unit product cost = Total Variable Cost per unit + Total Fixed Cost per unit
Unit product cost = R 610 + R 91.76
Unit product cost = R 701.76
Therefore, the unit product cost for one bicycle using absorption costing is R 701.76.