Question

Barnes company reports the following for its product for its first year of operations. direct materials 35 per unit direct labor 25 per unit variable overhead 11 per unit fixed overhead 80,000 per year variable selling and administrative expenses 2 per unit fixed selling and administrative expenses 37,000 per year compute total product cost per unit using absorption costing for the following production levels: (a) 4,000 units, (b) 5,000 units, and (c) 8,000 units?

Answer 1

For the total product cost per unit using absorption costing for Barnes company, one must add the variable costs per unit to the allocated fixed cost per unit at different production levels. Total cost per unit for 4,000 units (option a)

Step-by-step explanation:

Total costs for a product in a business setting include fixed and variable costs. To compute the total product cost per unit using absorption costing, dividing the sum of all costs by the number of units produced is necessary.

In Barnes Company's case, the following costs per unit are provided:

Direct materials: $35 per unit

The following fixed costs are also provided:

Fixed overhead: $80,000 per year

To get the total product cost per unit for each production level, we first need to calculate the variable costs per unit, which adds up the provided variable costs:

Variable costs per unit = $35 (materials) + $25 (labor) + $11 (overhead) = $71

Then we need to distribute the total fixed costs over each production level. Here is how it's calculated for each:

4,000 units: Fixed cost per unit = ($80,000 + $37,000) / 4,000 units = $29.25

Finally, we add the variable costs per unit to the fixed cost per unit for each production level to get the total cost per unit:

Total cost per unit for 4,000 units = $71 + $29.25 = $100.25