Question

Trio Company reports the following information for the current year, which is its first year of operations.

Direct materials $ 11 per unit
Direct labor $ 16 per unit
Overhead costs for the year
Variable overhead $ 2 per unit
Fixed overhead $ 100,000 per year
Units produced this year 25,000 units
Units sold this year 19,000 units
Ending finished goods inventory in units 6,000 units
Requried:
1. Compute the product cost per unit using absorption costing.

Answer 1

Unitary product cost= $33

Step-by-step explanation:

Giving the following information:

Direct materials $ 11 per unit

Direct labor $ 16 per unit

Overhead costs for the year

Variable overhead $ 2 per unit

Fixed overhead $ 100,000 per year

Units produced this year 25,000 units

Under the absorption costing cost method, the unitary product cost is calculated using the direct material, direct labor, and total unitary overhead.

First, we need to calculate the unitary fixed overhead:

Unitary fixed overhead= 100,000/25,000= $4

Unitary product cost= 11 + 16 + (2 + 4)= $33