Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Units in beginning inventory		0
Units produced		2,900
Units sold		2,600
Units in ending inventory		300
Variable costs per unit:
Direct materials	$	49
Direct labor	$	58
Variable manufacturing overhead	$	6
Variable selling and administrative expense	$	11
Fixed costs:
Fixed manufacturing overhead	$	55,100
Fixed selling and administrative expense	$	18,200

What is the absorption costing unit product cost for the month?

Answer 1

Direct materials = 2900 * 49 = 142,100

Direct labour = 2,900 * 58 = 168,200

Variable manufacturing overhead = 2,900 * 6 = 17,400

Variable manufacturing costs = Direct materials + Direct labour + Variable manufacturing overhead

= 142,100 + 168,200 + 17,400

= 327,700

Fixed manufacturing costs = 55,100

Total product costs = Variable manufacturing costs + Fixed manufacturing costs

= 327,700 + 55,100

= 382,800

Unit product cost for the month = Total product costs / Units produced

= 382,800 / 2,900

= 132