The Boston Box Company has two departments, fabrication and assembly. Boston uses machine hours to allocate overhead costs in the fabrication department and labor hours to allocate overhead costs in the assembly department. Pertinent data for each department follows:

Required:
a. One of Boston Box€™s products has direct materials costs of $50 per unit and direct labor costs of $42 per unit. This product uses one machine hour in the fabrication department and two labor hours in the assembly department. Finally, the product incurs $6 in variable selling costs and $5 in allocated fixed marketing costs per unit. Determine the inventoriable cost of this product under absorption costing.
b. Briefly discuss whether the inventoriable cost, as computed under absorption costing, is the appropriate cost estimate to use when determining a product€™s long-termprofitability.

Transcribed Image Text:

Item Overhcad costs $66,000 39,000 Labor hours Machine hours Faication Assembly 4,000 12,000 6,000 6,500