Asked by Cynthia Ocampo on Apr 26, 2024
Verified
The unit product cost under absorption costing is closest to:
A) $21.00
B) $31.00
C) $35.00
D) $10.00
Unit Product Cost
The total cost (including materials, labor, and overhead) divided by the number of units produced.
Absorption Costing
A financial recording technique that incorporates every manufacturing expense, such as direct materials, direct labor, and all overhead costs (variable and fixed), into the product's cost.
- Familiarize oneself with the notion of absorption costing and the techniques for its calculation.
- Determine and explain the cost per unit of product under variable and absorption costing techniques.
Verified Answer
IS
Itzel SantosApr 29, 2024
Final Answer :
B
Explanation :
Under absorption costing, both variable and fixed manufacturing costs are included in the unit product cost. The calculation for unit product cost is:
Unit product cost = (total manufacturing costs for the period / total units produced)
Total manufacturing costs = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead
Total manufacturing costs for the period = $1,500,000 + $1,200,000 + ($10 per unit x 60,000 units) + $300,000 = $3,300,000
Unit product cost = ($3,300,000 / 106,000 units) = $31.13 (rounded to nearest cent)
Therefore, the closest option is B) $31.00.
Unit product cost = (total manufacturing costs for the period / total units produced)
Total manufacturing costs = direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead
Total manufacturing costs for the period = $1,500,000 + $1,200,000 + ($10 per unit x 60,000 units) + $300,000 = $3,300,000
Unit product cost = ($3,300,000 / 106,000 units) = $31.13 (rounded to nearest cent)
Therefore, the closest option is B) $31.00.
Explanation :
Absorption costing unit product costs: 
Learning Objectives
- Familiarize oneself with the notion of absorption costing and the techniques for its calculation.
- Determine and explain the cost per unit of product under variable and absorption costing techniques.