Question

10. . Union Company reported the following information about the production and sale of its only product during the first month of operations:

Selling price per unit                                                      $225.00

Sales                                                                                 $315,000

Direct materials used                                                    $160,000

Direct labor                                                                    $100,000

Variable factory overhead                                             $60,000

Fixed factory overhead                                                   $80,000

Variable selling and administrative expenses            $20,000

Fixed selling and administrative expenses                 $30,000

Production volume variance                                                    0

Ending inventory, Direct Materials                                         0

Ending inventory, Work-in-process                                        0

Ending inventory, Finished Goods                           600 units

Under absorption costing, what is the product cost per unit?

A) $130.00

B) $160.00

C) $200.00

D) $225.00

Answer 1

Sales = $315,000

Selling price per unit = $225

Number of units sold = Sales/ Selling price per unit

= 315,000/225

= 1,400 units

ending inventory = 600 units

Number of units produced = Number of units sold +Ending inventory

= 1,400+600

= 2,000 units

Calculation of Unit Product Cost under Absorption Costing
Direct materials ( 160,000/2,000)	80
Direct labor (100,000/2,000)	50
Variable factory overhead (60,000/2,000)	30
Fixed factory overhead ( 80,000/2,000)	40
Unit product cost	$200

The product cost per unit = $200.

Correct option is C.

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