Exercise 7-1 Variable and Absorption Costing Unit Product Costs [LO7-1]

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 $850. Selected data for the company's operations last year follow:

Units in beginning inventory0Units produced250Units sold225Units in ending inventory25Variable costs per unit:Direct materials$100Direct labor$320Variable manufacturing overhead$40Variable selling and administrative$20Fixed costs:Fixed manufacturing overhead$60,000Fixed selling and administrative$20,000

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.