g sells its product for $60 per unit. During 2019, it produced 48000 units and sold 40000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $576000 manufacturing overhead, and $72000 selling and administrative expenses. Under absorption costing, what amount of fixed overhead is deferred to a future period?

Question

Business

Maurice Grimes

21 October, 12:34

g sells its product for $60 per unit. During 2019, it produced 48000 units and sold 40000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $576000 manufacturing overhead, and $72000 selling and administrative expenses. Under absorption costing, what amount of fixed overhead is deferred to a future period?

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Answers (1)

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Jean Sheppard · Answer 1

Fixed overhead allocated to ending inventory = $96,000

Explanation:

Giving the following information:

Production = 48,000

Sales = 40,000

Fixed manufacturing overhead = $576,000

First, we need to calculate the unitary fixed manufacturing overhead:

Unitary fixed manufacturing overhead = 576,000/48,000 = $12

Fixed overhead allocated to ending inventory = 12*8,000 = $96,000