Reference no: EM132611500

Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city's crowded streets that it sells for 500 rupees. (Indian currency is denominated in rupees, denoted by R.)

Selected data for the company's operations last year follow:

Units in beginning inventory . . . . . . . . . . . . . . . . . 0

Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000

Units sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Units in ending inventory . . . . . . . . . . . . . . . . . . . . 2,000

Variable costs per unit:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . R120

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . R140

Variable manufacturing overhead . . . . . . . . . . . R50

Variable selling and administrative . . . . . . . . . . R20

Fixed costs: Fixed manufacturing overhead . . . . . . . . . . . . . R600,000

Fixed selling and administrative . . . . . . . . . . . . R400,000

Required:

Question 1. Assume that the company uses absorption costing. Compute the unit product cost for one bicycle.

Question 2. Assume that the company uses variable costing. Compute the unit product cost for one bicycle.