Question

Computing absorption cost per unit and variable cost per unit Adamson, Inc. has the following cost data for Product X:

Direct materials $41 per unit
Direct labor 57 per unit
Variable manufacturing overhead 7 per unit
Fixed manufacturing overhead 20,000 per year

Required:
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

unit cost for 2,000 units=$115

unit cost for 2,500 units =$113

unit cost for 5,000 units= $109

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 + Variable production overhead + Fixed production overhead

Fixed production overhead = Budgeted overhead/Budgeted production units

unit cost for 2,000 units

unit cost = 41 + 57 + 7 + (20,000/2000) = $115

unit cost for 2,500 units

unit cost = 41 + 57 + 7 + (20,000/2,500)= $113

unit cost for 5,000 units

unit cost = 41 + 57 + 7 + (20,000/5,000) = $109

unit cost for 2,000 units=$115

unit cost for 2,500 units =$113

unit cost for 5,000 units= $109