variable costs 461430

Sharpens Inc. produces knife sets for use in commercial kitchens. They sell them for $400 each. Selected data for the company’s operations last year follow:

Units in beginning inventory 0

Units produced 3,000

Units sold 2,500

Units in ending inventory 500

Variable costs per unit:

Direct materials $120

Direct labor 80

Variable manufacturing overhead 40

Variable selling and administrative 20

Fixed costs:

Fixed manufacturing overhead $300,000

Fixed selling and administrative $200,000

a. Assume that the company uses variable costing, compute the unit cost for one knife set. Show computations.

b. Assuming that the company uses absorptions costing, compute the unit cost for the one knife set. Show computations.