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7 July, 03:29

Stiller Corporation incurred fixed manufacturing costs of $12,000 during 2011. Other information for 2011 includes: The budgeted denominator level is 2,000 units. Units produced total 1,500 units. Units sold total 1,200 units. Beginning inventory was zero. The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total:

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  1. 7 July, 07:20
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    Cost of Goods Sold will contain 9,600 of the fixed manufacturing cost

    Explanation:

    actual fixed cost 12,000

    Under absorption cost, the produced units will take the complete manufacturing cost

    total manufacturing cost / produced units

    12,000 / 1,500 units = 8

    Then, we multiply by the amount of units sold to know how much of the manufacturing cost were recognize during the period

    1,200 x 8 = 9,600

    The rest, will be capitalized into inventory.
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