Yankee Corporation manufactures a single product. The company has the following cost structure: Last year, 4,000 units were produced and 3,500 units were sold. There were no beginning inventories. Under absorption costing, the cost of goods sold for the year would be:

Question

Yankee Corporation manufactures a single product. The company has the following cost structure:  Last year, 4,000 units were produced and 3,500 units were sold. There were no beginning inventories. Under absorption costing, the cost of goods sold for the year would be:

Quizplus · Accepted Answer

Under absorption costing, the cost of goods sold includes both direct and indirect costs, such as factory overhead. The cost of goods sold can be calculated as follows:
Direct materials + direct labor + factory overhead + beginning inventory - ending inventory = cost of goods sold
Using the information provided in the question, we can calculate the cost of goods sold as follows:
Direct materials + direct labor + factory overhead = $4,000 + $8,400 + $12,500 = $24,500.

Yankee Corporation Manufactures a Single Product