Cutterski Corporation manufactures a propeller.Shown below is Cutterski's cost structure: In its first year of operations, Cutterski produced 60, 000 propellers but only sold 54, 000. What would Cutterski report as its cost of goods sold under absorption costing?
A)$6, 156, 000
B)$6, 885, 000
C)$6, 966, 000
D)$8, 208, 000

Question

Cutterski Corporation manufactures a propeller.Shown below is Cutterski's cost structure:  In its first year of operations, Cutterski produced 60, 000 propellers but only sold 54, 000. What would Cutterski report as its cost of goods sold under absorption costing?
A)$6, 156, 000 
B)$6, 885, 000 
C)$6, 966, 000 
D)$8, 208, 000

Quizplus · Accepted Answer

Absorption costing unit product cost = $114 per propeller + ($810, 000 ÷ 60, 000 propellers)
= $114.00 per propeller + $13.50 per propeller = $127.50 per propeller
Absorption costing cost of goods sold = 54, 000 propellers × $127.50 per propeller = $6, 885, 000

Cutterski Corporation Manufactures a Propeller