Question

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year. Units produced this year 25,000 units Units sold this year 15,000 units Direct materials $ 9 per unit Direct labor $ 11 per unit Variable overhead $ 75,000 in total Fixed overhead $ 137,500 in total Given Advanced Company's data, compute cost per unit of finished goods under absorption costing. $20.00 $34.17 $25.32 $23.00 $28.50

Answer 1

The cost per unit of finished goods under absorption costing is $28.50

Therefore, the correct option is d. $28.50

Step-by-step explanation:

Absorption costing : Under absorption costing, all types of cost is to be recorded whether it is fixed or variable.

The computation of cost per unit of finished goods is shown below:

= Total cost ÷ units produced

where,

total cost is = direct material + direct labor + variable overhead + fixed overhead

= $9 × 25,000 units + $11 × 25,000 units + $75,000 + $137,500

= $225,000 + $275,000 +$75,000 + $137,500

= $712,500

And, units produced is 25,000 units.

So, cost per unit = $712,500 ÷ 25,000 units

= $28.50

Hence, the cost per unit of finished goods under absorption costing is $28.50

Therefore, the correct option is d. $28.50