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Sprinkle Co. sells its product for $60 per unit. During 2016, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses. Cost of goods sold under absorption costing is_____________.

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Answer:

$1,950,000

Explanation:

The computation of the Cost of goods sold under absorption costing is shown below:

= Units sold × cost per unit

where,

Units sold is 50,000 units

And the cost per unit would be

= Direct material per unit + Direct labor per unit + variable overhead per unit + (Fixed costs ÷ produced units)

= $15 + $9 + $3 + ($720,000 ÷ 60,000 units)

= $27 + $12

= $39

Now put these values to the above formula  

So, the value would equal to

= 50,000 units × $39

= $1,950,000

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