Question 4: Inventory Valuation

Suggested time: 15 minutes

Athabasca Auto makes and sell auto batteries. In 2019 it made 120,000 batteries and sold 95,000 of them, at an average selling price of $480 per unit. The following additional information relates to Athabasca Auto for 2019:

Direct Materials

$160.00 per unit

Direct manufacturing labour

$32.00 per unit

Variable manufacturing costs

$64.00 per unit

Sales commissions

$48.00 per part

Fixed manufacturing costs

$1,750,000 per year

Fixed administrative expenses

$670,000 per year

What is Athabasca Auto manufacturing cost per unit using:

a. Variable costing (7 marks)

b. Absorption costing (8 marks)