Shastri Bicycle of Mumbai, India, produces an inexpensive, yet rugged, bicycle for use on the city's crowded streets that it sells for 500 rupees. (Indian currency is denominated in rupees denoted by R.) Selected data for the company's operations last year follow:
Units in beginning inventory................................... 0
Units Produced......................................................... 10,000
Units sold................................................................... 8,000
Units in ending inventory....................................... 2,000
Variable cost per unit:
Direct materials.................................................... R120
Direct labor............................................................... R140
Variable manufacturing overhead........................ R50
Variable selling and administrative...................... R20
Fixed Cost:
Fixed manufacturing overhead............................ R600,000
Fixed selling and administrative........................... R400,000
1. Assume that the company uses absorption costing. Compute the unit product cost for one bicycle.
2. Assume that the company uses variable costing. Compute the unit product cost for one bicycle.