Chuck Wagon Grills, Inc, makes a single product-a handmade specialty barbecue gr

Question

Chuck Wagon Grills, Inc, makes a single product-a handmade specialty barbecue grill that it sells for $205. Data for last years operations follow Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 0 10,000 9,200 800 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit 63 39 19 $ 132 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs $340,000 515,00e $855,000 Required: 1. Assume that th 2. Assume that the company uses absorption costing. Prepare an income statement for last e company uses absorption costing. Compute the unit product cost for one barbecue grill. year

Explanation / Answer

1) Unit product cost under absorption costing :

2) Absorption costing income statement :

Absorption costing Direct material 63 Direct labour 39 Variable manufacturing overhead 11 Fixed manufacturing overhead (340000/10000) 34 Unit product cost 147

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