Question

Pharoah makes Halloween costumes. The company incurred the following total costs to produce 26,600 costumes. Direct materials $223,000 Direct labor 182,000 Variable overhead 42,000 Fixed overhead 157,000(a) Under the absorption costing method, what is the average unit product cost? Using this method, how much product cost would be recorded on the income statement if 21,700 units were sold? (Round per unit to 2 decimal places, e.g. 15.25 and product cost to 0 decimal places, e.g. 5,275.)Average unit product cost $ Product cost $(b) Under the variable costing method, what is the average unit product cost? Using this method, how much product cost would be recorded on the income statement if 21,700 units were sold? (Round per unit to 2 decimal places, e.g. 15.25 and product cost to 0 decimal places, e.g. 5,275.)Average unit product cost $ Product cost $

Answer 1

Step-by-step explanation:

The computations are shown below:

a. Under the absorption costing method, the average unit product cost is

= (Direct materials cost + Direct labor cost + Variable overhead cost + Fixed overhead cost) ÷ (Number of unit produced)

= ($223,000 + $182,000 + $42,000 + $157,000) ÷ (26,600 units)

= $22.71

Now the product cost would be

= 21,700 units × $22.71

= $492,807

b. Under the variable costing method, the average unit product cost is

= (Direct materials cost + Direct labor cost + Variable overhead cost) ÷ (Number of unit produced)

= ($223,000 + $182,000 + $42,000) ÷ (26,600 units)

= $16.80

Now the product cost would be

= 21,700 units × $16.80

= $364,560