1. the total operating cost amount using the absorption costing method?

2. the total number of units produced in 2020?

with solution

The Green Manufacturing Company manufactures construction hardhats and uses a costing system based on standard costs. Variable manufacturing costs consist of direct material cost of $5.00 per unit and direct manufacturing labour costs of $2.00 per unit. The standard production rate is 20 (twenty) units per machine-hour. Total budgeted and actual fixed manufacturing overhead costs are $1,600,000. Fixed manufacturing overhead is allocated at $40 per machine-hour based on fixed manufacturing costs of $1,600,000 = 40,000 machine hours, which is the level Green Manufacturing Company uses as its denominator level. The selling price of each hardhat is $15 per unit. Variable operating (non- manufacturing) cost, which is driven by units sold, is $2 per unit. Fixed operating (non-manufacturing) costs are $820,000. Beginning inventory on January 1, 2020 was 10,000 units and ending inventory on December 31, 2020 is 20.000 units. Sales in 2020 were 700,000 units. For simplicity, assume that the same standard unit costs persisted in 2019 and 2020, and assume that there are no price, spending or efficiency variances. The company is trying to decide whether to use Absorption Costing, Variable Costing or Throughput Costing