Hola Company provided the following information regarding its one and only product-ice skates. $$\begin{array} { l l }
\text { Direct materials used } & \$ 200,000 \
\text { Direct labor } & 80,000 \
\text { Fixed overhead } & 100,000 \
\text { Fixed s elling and administrative costs } & 150,000 \
\text { Variable overhead } & 20,000 \
\text { Variable selling and administrative } & 60,000 \
\text { Selling unit price } & 75 \
\text { Units produced and sold } & 10,000
\end{array}$$ is the total manufacturing cost if the absorption approach is used.
A) $400,000
B) $300,000
C) $360,000
D) $280,000

Question

Hola Company provided the following information regarding its one and only product-ice skates. $$\begin{array} { l l } 
\text { Direct materials used } & \$ 200,000 \
\text { Direct labor } & 80,000 \
\text { Fixed overhead } & 100,000 \
\text { Fixed s elling and administrative costs } & 150,000 \
\text { Variable overhead } & 20,000 \
\text { Variable selling and administrative } & 60,000 \
\text { Selling unit price } & 75 \
\text { Units produced and sold } & 10,000
\end{array}$$ is the total manufacturing cost if the absorption approach is used.
A) $400,000
B) $300,000
C) $360,000
D) $280,000

Quizplus · Accepted Answer

Under the absorption approach, total manufacturing cost includes direct materials, direct labor, variable overhead, and fixed overhead. Therefore, the total manufacturing cost is $200,000 (direct materials) + $80,000 (direct labor) + $20,000 (variable overhead) + $100,000 (fixed overhead) = $400,000.

Hola Company Provided the Following Information Regarding Its One and Only