Question

Game Depot manufactures video games that it sells for $39 each. The company uses a fixed manufacturing overhead allocation rate of $6 per game. Assume all costs and production levels are exactly as planned. The following data are from Game Depot's first two months in business during 2018: EEB

Read the requirements.
Requirement 1. Compute the product cost per game produced under absorption costing and under variable costing. October 2018 AbsorptionVariable costing costing Total product cost per game

Answer 1

Using variable cost per unit method $20.15 per game

Using absorption costing $17 per game

Step-by-step explanation:

Cost per game is ;

overhead allocation rate is $6

variable cost is $11

Fixed manufacturing overheads 16,200

Fixed selling and administrative cost 8,500

units sales in month of October is 1,700 units

Production units 2,700 units

Total Fixed Overheads 16,200 + 8,500 = 24,700

Overhead rate = 24,700/ 2700 = 9.15

Total cost per unit (Variable + Fixed) = $20.15 / unit