Question

Adelphia Corporation, which uses absorption costing, just completed its first year of operations. Planned and actual production equaled 10,000 units, and sales totaled 9,600 units at $216 per unit. Cost data for the year are as follows:
Direct material (per unit)................................................$ 36
Conversion cost:
Direct labor..................................................................... 135,000
Variable manufacturing overhead.................................. 195,000
Fixed manufacturing overhead....................................... 660,000
Selling and administrative costs:
Variable (per unit)........................................................... 24
Fixed............................................................................... 354,000

Required:
1. Compute the company’s total cost for the year assuming that variable manufacturing costs are driven by the number of units produced, and variable selling and administrative costs are driven by the number of units sold.
2. How much of this cost would be held in year-end inventory under
(a) Absorption costing
(b) Variable costing?
3. How much of the company’s total cost for the year would be included as an expense on the period’s income statement under
(a) Absorption costing
(b) Variable costing?
4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1) and (2) above. Show how the solution will change if the following information changes: the direct-material cost is $35 per unit, and the total direct-labor cost is $130,000.



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  • CreatedApril 22, 2014
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