Question

Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 46,000 units and sold 38,000 units at a price of $130 per unit.

Manufacturing costs

Direct materials per unit $54
Direct labor per unit $20
Variable overhead per unit $6
Fixed overhead for the year $506,000
Selling and administrative costs
Variable selling and administrative cost per unit $12
Fixed selling and administrative cost per year $115,000

Required:
Assume the company uses absorption costing. Determine its product cost per unit.

Answer 1

Unitary costs= $91

Step-by-step explanation:

Giving the following information:

Direct materials per unit $54

Direct labor per unit $20

Variable overhead per unit $6

Fixed overhead for the year $506,000

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Unitary costs= (506,000 / 46,000) + 54 + 20 + 6

Unitary costs= $91