Question

Burns Company incurred the following costs during the year: direct materials $23.70 per unit; direct labor $13.10 per unit; variable manufacturing overhead $16.90 per unit; variable selling and administrative costs $12.00 per unit; fixed manufacturing overhead $122,100; and fixed selling and administrative costs $15,000. Burns produced 10,175 units and sold 6000 units. Determine the manufacturing cost per unit under (a) absorption costing and (b) variable costing. (Round answers to 2 decimal places, e.g. 52.75.) Manufacturing cost (a) Absorption Costing $ (b) Variable Costing $

Answer 1

Absorption costing per unit = $65.7

Variable costing = $53.7

Step-by-step explanation:

Absorption costing is method of costing where overheads are charged to units produced using volume-based bases. e.g machine hours, labour hours e.t.c. Units are valued using full cost per unit

Full cost per unit= Direct material cost + direct labor cost ,100/10,175 units

Manufacturing cost per unit =+ Variable manufacturing overhead + Fixed production overhead

fixed manufacturing overhead= $12223.70+13.10+ 16.90 + 12 = $65.7

Variable costing method

Variable costing values units produced using marginal cost.

Manufacturing cost per unit = Direct material cost + direct labor cost + Variable manufacturing overhead

Manufacturing cost per unit =23.70+13.10+ 16.90= $53.7