Question

Juan Sugita Manufacturing expects to produce and sell 12,000 units of Big, its only product, for $20 each. Direct material cost is $3 per unit, direct labor cost is $10 per unit, and variable manufacturing overhead is $6 per unit. Fixed manufacturing overhead is $24,000 in total. Variable selling and administrative expenses are $1 per unit, and fixed selling and administrative costs are $3,000 in total. According to generally accepted accounting principles, inventoriable cost per unit of Big would be ________.*

A) $13.00 per unit
B) $14.00 per unit
C) $21.00 per unit
D) $18.50 per unit"

Answer 1

The inventoriable cost per unit for Juan Sugita Manufacturing is calculated by adding the direct material cost, direct labor cost, variable manufacturing overhead, and the allocated fixed manufacturing overhead. The correct calculation leads to $21.00 per unit, making option C the correct answer.

Step-by-step explanation:

The student is asking about the calculation of the inventoriable cost per unit for a company called Juan Sugita Manufacturing according to generally accepted accounting principles. To find the inventoriable cost per unit, we add up all the product costs that are included in inventory, which typically are direct materials, direct labor, and both variable and fixed manufacturing overhead. In this case, the direct material cost is $3 per unit, direct labor cost is $10 per unit, and variable manufacturing overhead is $6 per unit.

The fixed manufacturing overhead of $24,000 will need to be allocated per unit by dividing it by the total number of units, which gives us $2 per unit ($24,000 / 12,000 units).

Thus, the total inventoriable cost per unit is the sum of all these costs:

$3 (material) + $10 (labor) + $6 (variable overhead) + $2 (fixed overhead) = $21 per unit.

Therefore, the correct answer is C) $21.00 per unit.