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Hughes manufacturing variable absorption costing

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Hughes, Inc., manufactures digital voice recorders. During 2010, total costs associated with manufacturing 209,200 of the new MV-5253 model (introduced this year) were as follows:

Raw materials $ 1,781,900
Direct labor 2,954,500
Variable manufacturing overhead 753,800
Fixed manufacturing overhead 709,500

Requirement 1:
Calculate the cost per recorder under both variable costing and absorption costing. (Round your answers to 2 decimal places)

Cost per recorder
a. Variable costing $:______
b. Absorption costing $:_________

Requirement 2:
If 21,160 of these recorders were in finished goods inventory at the end of 2010, what would be the difference in cost under variable costing than under absorption costing? (Do not round your intermediate calculations. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Total fixed cost $:______

Requirement 3:
(a) Express the digital voice recorder cost in a cost formula. (Round your answers to 2 decimal places)

Total cost = $ ________ + $________ per digital voice recorder produced.

(b) What does this formula suggest the total cost of making an additional 1,680 recorders would be? (Do not round your intermediate calculations. Round your final answer to the nearest dollar amount)

Total Additional cost $:________

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Solution Summary

Your solution is in Excel so you have a template for other problems. This layout helps you to "see" how variable and absorption costing differ. Formulas are in cells.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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