Question

Olds Inc., which produces a single product, has provided the following data for its most recent month of operations:

Number of units produced	9,700
Variable costs per unit:
Direct materials	$121
Direct labor	$105
Variable manufacturing overhead	$6
Variable selling and administrative expense	$13
Fixed costs:
Fixed manufacturing overhead	$349,200
Fixed selling and administrative expense	$727,500

There were no beginning or ending inventories. The absorption costing unit product cost was:

$226 per unit

$268 per unit

$232 per unit

$356 per unit

Answer 1

• Note, the question says that there were no opening or closing inventories, which means all produced units are sold too. Hence, total cost will need to be calculated and then divided by total units produced/sold to get the ABSORPTION COSTING UNIT PRODUCT COST
• All working forms part of the solution

A	Fixed manufacturing Overhead	349200
B	Fixed Selling & Administrative expenses	727500
C=A+B	Total Fixed expenses	1076700
D	Total units	9700
E=C/D	Fixed expenses per unit	111
	Variable costs per unit
F	Direct material	121
G	Direct labour	105
H	Variable manufacturing Overhead	6
I	Variable Selling & Administrative Overhead	13
J=F+G+H+I	Variable cost per unit	245
E+J	Total Cost per unit	356

Hence, the correct answer is OPTION-D which is $356 per unit (as calculated above)