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 sounding bars are cast from brass and hand-filed to attain just the right sound. The bars are then mounted on an intricately hand-carved wooden base. The gamelans are sold for 850 (thousand) rupiahs. (The currency in Indonesia is the rupiah, which is denoted by Rp.) Selected data for the company's operations last year follow (all currency values are in thousands of rupiahs):
(a) Assume that the company uses absorption costing. Compute the unit product cost for one gamelan.

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khuranashilpa76 khuranashilpa76 · Answer 1 · 2022-09-04T12:06:24+02:00

Variable costing unit product cost $ 779.

The manufactured merchandise is bought.

Units in beginning inventory 0

Units produced 13,000

Units sold 9,000

Units in ending inventory 4,000

Variable costs per unit:

Direct materials $ 220

Direct labor $ 500

Variable manufacturing overhead $ 59

Variable selling and administrative $ 24

Fixed costs:

Fixed manufacturing overhead $ 790,000

Fixed selling and administrative $ 580,000

1. Under absorption costing, all manufacturing costs (variable and fixed) are included in product costs.

Direct materials $ 220

Direct labor 500

Variable manufacturing overhead 59

Fixed manufacturing overhead

($790,000 ÷ 13,000 units) 61

Absorption costing unit product cost $ 840

Under variable costing, only the variable manufacturing costs are included in product costs.

Direct materials $ 220

Direct labor 500

Variable manufacturing overhead 59

Hence, Variable costing unit product cost $ 779.

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