Cutterski Corporation manufactures a propeller.Shown below is Cutterski's cost structure: In its first year of operations,Cutterski produced 60,000 propellers but only sold 54,000. What would Cutterski report as its cost of goods sold under absorption costing?
A)$6,156,000
B)$6,885,000
C)$6,966,000
D)$8,208,000

Question

Cutterski Corporation manufactures a propeller.Shown below is Cutterski's cost structure:  In its first year of operations,Cutterski produced 60,000 propellers but only sold 54,000. What would Cutterski report as its cost of goods sold under absorption costing?
A)$6,156,000 
B)$6,885,000 
C)$6,966,000 
D)$8,208,000

Quizplus · Accepted Answer

Absorption costing unit product cost = $114 per propeller + ($810,000 ÷ 60,000 propellers)
= $114.00 per propeller + $13.50 per propeller = $127.50 per propeller
Absorption costing cost of goods sold = 54,000 propellers × $127.50 per propeller = $6,885,000

Cutterski Corporation Manufactures a Propeller