Question - Adelphia Corporation, which uses absorption costing, just completed its first year of operations. Planned and actual production equaled 13,000 units, and sales totaled 11,700 units at $184 per unit. Cost data for the year are as follows:
Direct material (per unit) $ 37
Conversion cost:
Direct labor 715,000
Variable manufacturing overhead 598,000
Fixed manufacturing overhead 715,000
Selling and administrative costs:
Variable (per unit) 39
Fixed 355,700
Required:
1. Compute the company's total cost for the year assuming that variable manufacturing costs are driven by the number of units produced, and variable selling and administrative costs are driven by the number of units sold.
2. How much of this cost would be held in year-end inventory under (a) absorption costing and (b) variable costing?
3. How much of the company's total cost for the year would be included as an expense on the period's income statement under (a) absorption costing and (b) variable costing?