Question

Adamson, Inc. has the following cost data for Product X: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $ 41 per unit 57 per unit 7 per unit 20,000 per year Learning Objective 2 Calculate the unit product cost using absorption costing and variable costing when production is 2,000 units, 2,500 units, and 5,000 units.

Answer 1

Answer and Explanation:

The computation of the unit product cost using absorption costing and variable costing is shown below

Under absorption costing

Particulars 2,000 units 2,500 units 5,000 units

Direct materials per unit $41 $41 $41

Direct labor per unit $57 $57 $57

Variable manufacturing

overhead per unit $7 $7 $7

Fixed manufacturing

overhead per unit $10 $8 $4

($20,000 ÷ 2,000 units) ($20,000 ÷ 2,500 units) ($20,000 ÷ 5,000 units)

Unit product cost $115 $113 $109

Under variable costing

Particulars 2,000 units 2,500 units 5,000 units

Direct materials per unit $41 $41 $41

Direct labor per unit $57 $57 $57

Variable manufacturing

overhead per unit $7 $7 $7

Unit product cost $105 $105 $105