Question

Under absorption costing, a company had the following unit costs when 9,000 units were produced. Direct labor $ 7.25 per unit Direct material $ 8.00 per unit Variable overhead $ 5.50 per unit Fixed overhead ($67,500/9,000 units) $ 7.50 per unit Total production cost $ 28.25 per unit Compute the total product cost per unit under variable costing if 30,000 units had been produced.

Answer 1

Total Product cost under variable costing is $690,000

Step-by-step explanation:

Total Absorption unit Cost = $28.25

Under Variable costing variable cost are calculated separately and Fixed cost is added to the value.

Total Variable Cost = 30,000 x ( $7.25 + $8.00 + $5.5 )

Total Variable Cost = 30,000 x $20.75 = $622,500

Total product cost = Variable cost + Fixed cost = $622,500 + $67,500 = $690,000