Home Base, Inc. reports the following production cost information:
Beginning Inventory 10, 000 units
Units produced 97,000 units
Units sold 92,000 units
Direct Labor $17 per unit
Direct Materials $34 per unit
Variable Overhead $2,522,000 in total
Fixed Overhead $ 1,940,000 in total
Operating Costs $ 2,000,000 in total

Assume that production costs have remained the same since the previous period and all units are sold for $137.00 per unit.
A. Compute production cost per unit under variable costing
B. Compute production cost per unit under absorption costing
C. Determine net income using variable costing
D. Determine net income using absorption costing


A. Variable Costing
Units produced 97,000 units
Unit Cost = DM DL VOH
= $34 $17 $26 VOH= $2,522,000/ 97000 UNITS = $26
= $77

B. Absorption Costing
Unit = DM DL VOH FOH
= $34 $17 $26 $20
= $97

FOH= $1,940,000/ 97,000 UNITS = $20

C. AND D I am kind of lost? What do I do with the beginning inventory also
VOH= $2,522,000/ 97,000 UNITS = $26