A Company Reports the Following Information Regarding Its Production Cost

question 10

Essay

A company reports the following information regarding its production cost:
$$\begin{array} { | l | l | } \hline \text { Units produced } & 22,000 \text { units } \\\hline \text { Direct labor } & \$ 31 \text { per unit } \\\hline \text { Direct materials } & \$ 27 \text { per unit } \\\hline \text { Variable overhead } & ? \text { in total } \\\hline \text { Fixed overhead } & \$ 2,750,000 \text { in total } \\\hline\end{array}$$ Required: Perform the following independent calculations.
a. Compute total variable overhead cost if the production cost per unit under variable costing is $240.
b. Compute total variable overhead cost if the production cost per unit under absorption costing is $240.

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Definitions:

Actual Output

The actual total value of goods and services produced by an economy over a specific period.

Potential Output

Potential output refers to the maximum amount of goods and services an economy can produce when it uses its resources fully and efficiently, without prompting inflation.

Cash Conversion Cycle

A metric that expresses the duration (in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

DSO

Days Sales Outstanding, a measure of the average number of days that a company takes to collect revenue after a sale has been made.