Question

A corporation produces a single product and has the following cost structure

Number of units produced each year 7000
Variable costs per unit
Direct materials 51
Direct labor 12
Variable manufacturing overhead 2
Variable selling and administrative expense 5
Fixed costs per year
Fixed manufacturing overhead.. 441000
Fixed selling expense 112000
The absorption costing unit product cost is:______.
A) $149 per unit
B) $65 per unit
C) $63 per unit
D) $128 per unit

Answer 1

D) $128 per unit

Step-by-step explanation:

The computation of the unit product cost using the absorption costing is shown below:

= Direct materials per unit + direct labor per unit + Variable manufacturing overhead per unit + fixed manufacturing overhead per unit

= $51 + $12 + $2 + ($441,000 ÷ 7,000 units)

= $128

We simply added the direct material, direct labor, variable manufacturing overhead per unit, and the fixed manufacturing overhead per unit