Precision Bearings manufactures several kinds of roller bearings. This past year, Precision spent $11,750,000 on fixed manufacturing costs, $1,762,500 on fixed selling and administrative costs, and $23,500,000 for direct labor. Precision produced 5,875,000 bearings and sold 5,500,000 bearings during the year.
The following table provides the direct materials and labor costs for three of Precision€™s bearings:

Required:
a. Assume that Precision allocates fixed costs using the number of units produced as the allocation basis. Under absorption costing, what is the inventoriable cost per unit of each of the three bearings?
b. Assume that Precision allocates fixed costs using direct labor costs as the allocation basis. Under absorption costing, what is the inventoriable cost per unit of each of the three bearings?
c. Compare the answers to parts (a) and (b). Comment on any differences in inventoriablecost

Transcribed Image Text:

Model 6203 Model 6210 $1.75 $4.00 Model 30207 $3.00 $7.00 Materials cost $1.00 Cabor cost $3.00