Reference no: EM132419796

Inferring Costing Method; Unit Product Cost (LO1)

Amcor, Inc., incurs the following costs to produce and sell a single product

Variable costs per unit:

Direct materials                                                                                             $10

Direct labour                                                                                                 $5

Variable manufacturing overhead                                                                   $2

Variable selling and administrative expenses                                                  $4

Fixed costs per year:

Fixed manufacturing overhead                                                                       $90,000

Fixed selling and administrative expenses                                                      $300,000

During the last year, 30,000 units were produced and 25,000 units weresole. The Finished Goods inventory account at the end of the year show a balanace of $85,000 for the 5,000 unsold units

Required

1. Is the company using absorption costing or variable costing to cost units in the Finished Goods inventory account? Show computations to support your answer