Question

Exercise 06-1 Computing unit and inventory costs under absorption costing LO P1 Trio Company reports the following information for the current year, which is its first year of operations.

Direct materials $ 13 per unit
Direct labor $ 20 per unit
Overhead costs for the year
Variable overhead $ 3 per unit
Fixed overhead $ 135,000 per year
Units produced this year 22,500 units
Units sold this year 16,500 units
Ending finished goods inventory in units 6,000 units
Compute the product cost per unit using absorption costing.

Answer 1

under absorption unit cost: $42

Step-by-step explanation:

absorption cost will distribute the fixed cost among the entire production of the period rather than declare period cost like in variable coting system

variable cost:

materials 13

labor 20

overhead 3

Total variable 36

fixed overhead distributed among produced units: 135,000 / 22,500 = 6

Total unit cost: 36 + 6 = 42