Question

Given the following data, calculate product cost per unit under absorption costing.

Direct labor $ 18 per unit
Direct materials $ 12 per unit
Overhead
Total variable overhead $ 31,000
Total fixed overhead 101,000
Expected units to be produced 51,000 units

A. $30.00 per unit
B. $30.61 per unit
C. $31.98 per unit
D. $32.59 per unit
E. $33.00 per unit

Answer 1

Under absorption costing, the product cost per unit can be calculated by adding the direct labor, direct materials, and overhead costs and dividing it by the expected units to be produced. In this case, the product cost per unit is $30.61.

Step-by-step explanation:

To calculate the product cost per unit under absorption costing, you need to consider the direct labor, direct materials, and overhead costs. The total variable overhead is $31,000 and the total fixed overhead is $101,000. The expected units to be produced is 51,000 units. To calculate the product cost per unit, you need to divide the total overhead costs by the expected units to be produced and add it to the direct labor and direct materials costs.

Product Cost per Unit = (Direct Labor + Direct Materials + Total Overhead) / Expected Units to be Produced

Product Cost per Unit = ($18 + $12 + $101,000) / 51,000

Product Cost per Unit = $30.61