Question

Josh’s Manufacturing Company reported fixed manufacturing overhead of $2,500,000, and 2,600,000 total units. The variable manufacturing costs were $1.50 per unit. What is the cost per unit using absorption costing?

Answer 1

$0.54

Step-by-step explanation:

Given: Fixed manufacturing overhead = $2500000.

Total number of unit= 2600000.

The variable manufacturing costs= $1.50 per unit.

First finding the cost per unit of manufacturing overhead.

Cost per unit of manufacturing overhead=
`(Fixed\ manufacturing\ overhead)/(Total\ number\ of\ units)`

⇒ Cost per unit of manufacturing overhead=
`(2500000)/(2600000)`

∴ Cost per unit of manufacturing overhead= $0.96154

Next finding the cost per units using absorption costing.

Cost per unit=
`Per\ unit\ variable\ manufacturing\ cost - Per\ unit\ cost\ of\ fixed\ manufacturing\ overhead`⇒ Cost per unit=
`\$ 1.50 -\$ 0.96154`

∴ Cost per unit=
`0.5384 \approx \$0.54`

Hence, $0.54 is the cost per unit using absorption costing.