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Answer:
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Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).
Absorption costing:
Unitary fixed overhead= 940,000/23,000= $40.87
Unitary production cost= 180 + 340 + 51 +40.87
Unitary production cost= $610.87
Variable costing:
Unitary production cost= 180 + 340 + 51
Unitary production cost=$571
The absorption costing method includes all costs related to production and variable costs includes all variable production costs.
What are absorption costs?
Absorption costs, also known as absorption costs, are a management calculation method that combines both highly flexible and adjusted cost to produce a particular product.
Knowing the full cost of production per unit enables manufacturers to price their products.
Calculation of Production costs assuming that the method of Absorption costing:
[tex]\rm\,Unitary \;Fixed \;Overhead= \dfrac{\$940,000}{23,000}\\\\Unitary \;Fixed \;Overhead== \$40.87 \;per \;unit\\\\Unitary \;Production \;Cost= (180 + 340 + 51 +40.87)\\\\Unitary \; Production \;Cost= \$610.87[/tex]
b) Calculation of production costs by variable costing method:
[tex]\rm\,Unitary \; Production \;Cost= (\$180 +\$340 + \$51)\\\\Unitary \;Production \;Cost=\$571[/tex]
Hence, The unit product cost for one gamelan by applying absorption costing is $610.87 and by variable costing is $571.
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