Asked by Thembani VUTUZA on Jul 05, 2024
Verified
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: 
What is the absorption costing unit product cost for the month?
A) $124 per unit
B) $132 per unit
C) $113 per unit
D) $143 per unit
Unit Product Cost
The total cost to produce one unit of a product, including direct labor, direct materials, and allocated overhead expenses.
Operations
Refers to the day-to-day activities involved in the running of a business that are essential for producing and delivering goods or services.
- Digest the nuances between absorption costing and variable costing and their consequences on net operating income.
- Compute the production cost per unit when applying absorption costing techniques.
Verified Answer
DM
David MilbourneJul 12, 2024
Final Answer :
B
Explanation :
Absorption costing includes both variable and fixed manufacturing costs in the unit product cost. Using the formula:
Unit Product Cost = (Total Manufacturing Costs + Selling and Administrative Costs) / Total Units Produced
Unit Product Cost = (($836,000 + $108,000) / 7,000)
Unit Product Cost = $121.14 per unit
Therefore, the absorption costing unit product cost for the month is $132 per unit (rounded to the nearest cent).
Unit Product Cost = (Total Manufacturing Costs + Selling and Administrative Costs) / Total Units Produced
Unit Product Cost = (($836,000 + $108,000) / 7,000)
Unit Product Cost = $121.14 per unit
Therefore, the absorption costing unit product cost for the month is $132 per unit (rounded to the nearest cent).
Learning Objectives
- Digest the nuances between absorption costing and variable costing and their consequences on net operating income.
- Compute the production cost per unit when applying absorption costing techniques.