Question

EA14.

LO 6.5Cool Pool has these costs associated with production of 20,000 units of accessory products: direct materials, $70; direct labor, $110; variable manufacturing overhead, $45; total fixed manufacturing overhead, $800,000. What is the cost per unit under both the variable and absorption methods?

Answer 1

$225 and $265

Step-by-step explanation:

The computation is shown below:

For variable method:

= Direct materials per unit + direct labor per unit + variable manufacturing overhead per unit

= $70 + $110 + $45

= $225

For absorption method:

= Direct materials per unit + direct labor per unit + variable manufacturing overhead per unit + fixed manufacturing overhead per unit

= $70 + $110 + $45 + $40

= $265

The fixed manufacturing overhead per unit would be

= (Total fixed manufacturing overhead) ÷ (number of units produced)

= ($800,000) ÷ (20,000 units)

= $40