A Company Reports the Following Information Regarding Its Production Cost

question 132

Essay

A company reports the following information regarding its production cost:
$$\begin{array} { | l | l | } \hline \text { Units produced } & 14,000 \text { units } \\\hline \text { Direct labor } & \$ 13 \text { per unit } \\\hline \text { Direct materials } & \$ 3 \text { per unit } \\\hline \text { Variable overhead } & ? \text { in total } \\\hline \text { Fixed overhead } & \$ 56,000 \text { in total } \\\hline\end{array}$$ Required: Perform the following independent calculations.
a. Compute total variable overhead cost if the production cost per unit under variable costing is $73.
b. Compute total variable overhead cost if the production cost per unit under absorption costing is $73.

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Definitions:

Interest

The cost of borrowing money, typically expressed as a percentage of the principal, or the gain from lending money.

Loan

A sum of money borrowed from a lender that is expected to be paid back with interest.

Compounded Quarterly

Describes interest on a loan or investment calculated four times a year.

Investment

Allocating resources, usually money, with the expectation of generating an income or profit.