Exercise 6-1 Variable and Absorption Costing Unit Product Costs [LO6-1]

Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $1,010. Selected data for the companys operations last year follow:

Units in beginning inventory		0
Units produced		15,000
Units sold		11,000
Units in ending inventory		4,000
Variable costs per unit:
Direct materials		$ 260
Direct labor		$ 500
Variable manufacturing overhead		$ 61
Variable selling and administrative		$ 23
Fixed costs:
Fixed manufacturing overhead		$ 880,000
Fixed selling and administrative		$ 940,000

Required:

1.	Assume that the company uses absorption costing. Compute the unit product cost for one gamelan.

2.	Assume that the company uses variable costing. Compute the unit product cost for one gamelan.