Magenta Inc. reports the following information for the current year, which is its first year of operations: If the company's cost per unit of finished goods using absorption costing is $39.75, what is total variable overhead?
A) $925,000
B) $877,500
C) $937,500
D) $865,800
E) $5,437,500

Question

Magenta Inc. reports the following information for the current year, which is its first year of operations:  If the company's cost per unit of finished goods using absorption costing is $39.75, what is total variable overhead?
A) $925,000 
B) $877,500 
C) $937,500 
D) $865,800 
E) $5,437,500

Quizplus · Accepted Answer

$39.75 = DM + DL + VOH + FOH
$39.75 = $18.30 + $14.20 + VOH + ($4,500,000/750,000)
$39.75 = $38.50 + VOH
VOH = $1.25 per unit
$1.25 per unit × 750,000 units = $937,500