Sprinkle Co. sells its product for $60 per unit. During 2016, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses.
a. The per-unit manufacturing cost under absorption costing is
b. The per unit manufacturing cost under variable costing is
c. Cost of goods sold under absorption costing is
d. Ending inventory under variable costing is
e. Under absorption costing, what amount of fixed overhead is deferred to a future period?

(a) $39

(b) $27

(c) $1,950,000

(d) $270,000

(e) $120,000

Explanation:

According to the scenario, computation of the given data are as follow:-

Total Variable Cost Per Unit = Direct Materials + Direct Labor + Variable Overhead

= $15 + $9 + $3 = $27

Fixed Cost Per Unit = Fixed Cost ÷ Produced Unit

= $720,000 ÷ 60,000 = $12

A). Per Unit Manufacturing Cost Under Absorption Cost = Fixed Cost Per Unit + Total Variable Cost Per Unit

= $12 + $27 = $39

b). Per Unit Manufacturing Cost Under Variable Cost = $27

c). Cost of Goods Sold Under Absorption Cost = Per Unit Manufacturing Cost Under Absorption Costing × Sold Unit

= $39 × 50,000 Units = $1,950,000

d). Ending Inventory Under Variable Cost = (Produced Units - Sold Units) × Total Variable Cost

= (60,000 - 50,000) × $27

= 10,000 × $27 = $270,000

e). Under Absorption Cost, Amount of Fixed Overhead is Deferred to a Future Period= (Produced Units - Sold Units) × Fixed Cost Per Unit

= (60,000 - 50,000) × $12

= 10,000 × $12 = $120,000

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