Question

Question 4: Inventory Valuation Suggested time: 15 minutes Athabasca Auto makes and sell auto batteries. In 2019 it made 120,000 batteries and sold 95,000 of them, at an average selling price of $480 per unit. The following additional information relates to Athabasca Auto for 2019 Direct Materials Direct manufacturing labour Variable manufacturing costs Sales commissions Fixed manufacturing costs Fixed administrative expenses S160.00 per unit $32.00 per unit $64.00 per unit $48.00 per part $1,750,000 per year 5670,000 per year What is Athabasca Auto manufacturing cost per unit using:

Answer 1

a.

manufacturing cost per unit under variable costing:

Cost per unit = Direct materials + Direct manufacturing labour + Variable manufacturing costs

Cost per unit = 160 + 32 + 64

Cost per unit = $256

.

b.

manufacturing cost per unit under absorption costing:

Cost per unit = Direct materials + Direct manufacturing labour + Variable manufacturing costs + Fixed manufacturing costs

Cost per unit = 160 + 32 + 64 + 1750000/120000

Cost per unit = 160 + 32 + 64 + 14.58

Cost per unit = $270.58

Note:

Manufacturing costs does not include selling and administrative expenses.