Question

Shed Industries produces two products. The products' identified costs are as follows: Product A: Direct Materials $20,000 and direct labor is $12,000. Product B: Direct MAterials $15,000 and direct labor is $24,000. The company's overhead costs of $54,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product A?

Answer 1

the cost per unit for product A is $9.50

Step-by-step explanation:

Calculation of cost per unit for product A

Direct Materials ($20,000/4,000) = $5.00

Direct labor ($12,000/4,000) = $3.00

Overheads ($54,000/( $12,000+$24,000)) = $1.50

Total cost per unit = $9.50

Cost of Overheads per unit is equal to Overhead Absorption Rate per unit based on direct labor cost.