Question

Mentor Corp. has provided the following information for the current year: Units produced 3,500 units Sale price $ 200 per unit Direct materials $ 70 per unit Direct labor $ 55 per unit Variable manufacturing overhead $ 20 per unit Fixed manufacturing overhead $ 350,000 per year Variable selling and administrative costs $ 30 per unit Fixed selling and administrative costs $ 150,000 per year Calculate the unit product cost using variable costing. Group of answer choices

Answer 1

Calculation of the unit product cost using variable costing

Direct materials 70

Direct labor 55

Variable Manufacturing Overhead 20

Product Cost 145

Therefore unit product cost is $145

Step-by-step explanation:

It is important for this question to note that only Manufacturing Costs are included in calculation of product cost.

Non- Manufacturing costs are written off in Profit and loss account as period costs

Variable Costing

Variable costing system only allocates variable manufacturing costs to products to arrive at product cost.

Fixed manufacturing overheads are not included in product cost under this system and they are written off to the profit and loss account as a period cost.