Daniel Dobbins - average cost per unit in 1987 comes out to...

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Daniel Dobbins Distillery case One different way of assigning other costs to inventoriable costs would be to just calculate the extra money spent on the ‘Other costs’ in 1988. Calculate the per unit cost (for the extra 20000 units) and calculate the weighted average cost per unit for 1988 and based on that make the income statement Other costs 1987 (in $ thousan ds) 1988 (in $ thousan ds) Difference (in $ thousands) Per unit cost (based on the extra 20000 units produced in 1988) Cumulative cost Average cost per barrel 52.4 52.4 0 52.4 Cost of barrels at $63 per barrel 2709 3969 1260 1260/20 = 63 115.4 Occupancy cost Factory building Rented building 265 272 297 572 32 300 1.6 15 117 132 Warehouse labor and warehouse supervisor 188 334 146 7.3 139.3 Cumulative cost after including upto warehouse labor and supervisor cost in inventory the
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Unformatted text preview: average cost per unit in 1987 comes out to be 132.46 For 1988 Opening Inventory = 43000 x 4 x 132.26 = $ 22749 (in thousand) Production Cost = 43000 x 132.26 + 20000 x 139.3 = $ 8473 (in thousand) Weighted Average cost = ( 22749+8473 ) / 235000 ( 235000 are the total no of units) = $ 132.86 Closing inventory in 1988 = 192000 x 132.86 = $ 25509 (in thousand) Cost of goods sold = 8473 + 22749 25509 = $ 5713 Add bottling costs = $ 458 Total COGs = 6171 This shows that there is no difference in taking the entire production of 63000 in 1988 and calculating the CoGs and income statement or one can take only the extra production & costs and reach the same figures....
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