Question

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $ 151
Units in beginning inventory 0
Units produced 6,950
Units sold 6,650
Units in ending inventory 300
Variable costs per unit:
Direct materials $ 25
Direct labor $ 55
Variable manufacturing overhead $ 19
Variable selling and administrative expense $ 19
Fixed costs:
Fixed manufacturing overhead $ 187,650
Fixed selling and administrative expense $ 27,900
What is the unit product cost for the month under variable costing?
Multiple Choice
O $99 per unit
O $126 per unit
O $145 per unit
$118 per unit

Answer 1

The unit product cost under variable costing for Aaron Corporation is $118 per unit. This includes direct materials, direct labor, variable manufacturing overhead, and variable selling and administrative expense. Option D is correct.

The unit product cost under variable costing includes variable manufacturing costs (direct materials, direct labor, variable manufacturing overhead) and variable selling and administrative expense. Fixed costs are not included in the unit product cost under variable costing.

Let's calculate the unit product cost:

Unit Product Cost = Variable Manufacturing Costs + Variable Selling and Administrative Expense

Unit Product Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Variable Selling and Administrative Expense

Unit Product Cost = (25 + 55 + 19) + 19

Unit Product Cost = $118

Therefore, the correct answer is:

D. $118 per unit