Solving for Missing Values Using Absorption and Variable Costing Relationships Each of the following situations is independent.
1. Kester Company had ending inventory cost of $5,000 under absorption costing. Ending inventory cost $3,400 under variable costing. Kester produced 16,000 units and sold 15,200. What was fixed overhead per unit? If unit fixed overhead is based on normal production of 16,000 units, what was total fixed overhead?
2. Gonsalves Company has prime cost of $6 per unit. Total fixed overhead is $23,000 and is allocated based on normal production of 20,000 units. Ending inventory consists of 6,000 units which cost $8.00 per unit under absorption costing. What is variable overhead cost per unit?
3. Last year, Shermer Company’s operating income was $45,000 under absorption costing and $42,500 under variable costing. Fixed overhead was applied at the rate of $2.50 per unit. Beginning inventory was zero. How many units were in ending inventory?