Question

Number of units produced 13,400 variable costs per unit: direct materials 179 direct labor 64 variable manufacturing overhead 3 variable selling and administrative expenses 8 fixed costs: fixed manufacturing overhead 683,400 fixed selling and administrative expenses 268,000 the company had no beginning or ending inventories. required: compute the unit product cost under absorption costing. compute the unit product cost under variable costing.

Answer 1

Unit product cost under absorption costing includes both variable and fixed manufacturing costs and is $297 per unit. Under variable costing, only variable manufacturing costs are considered, resulting in a cost of $246 per unit.

Step-by-step explanation:

To calculate the unit product cost under absorption costing, one must consider all manufacturing costs, both variable and fixed. First, we add up all the variable manufacturing costs per unit which include direct materials, direct labor, and variable manufacturing overhead, giving us a total variable cost per unit of $246 ($179 + $64 + $3). Then, we need to allocate the fixed manufacturing overhead to each unit produced by dividing the total fixed manufacturing overhead by the number of units produced, resulting in a cost of $51 ($683,400 ÷ 13,400 units). The unit product cost under absorption costing is the sum of the variable cost per unit and the allocated fixed manufacturing overhead per unit, which amounts to $297 ($246 + $51).

For the variable costing, only the variable manufacturing costs are considered in the unit product cost. Since this costing method does not include fixed manufacturing overhead costs, the unit product cost is solely the sum of direct materials, direct labor, and variable manufacturing overhead, which we've already calculated as $246 per unit.