Question

West Village Products has budgeted the following costs for the year for one of their products assuming a production level of 10,000 units:

Direct materials	$280,000		Direct Labor	$152,000
Factory rent	50,000		Factory depreciation	15,000
Sales office rent	22,000		Sales office depreciation	4,000
Factory supplies	45,000		Sales office supplies	8,000
Sales salaries	74,000		Factory manager salaries	56,000

West Village has determined that factory overhead is most directly related to machine hours. 4,000 machine hours are budgeted for the year. It takes .4machine hours to produce one unit of product.

What is the manufacturing cost per unit for this product under full absorption costing?

Answer 1

Manufacturing cost per unit

$59.80

Working:

Manufacturing cost per unit
Direct material (280,000 / 10,000)	$28.00
Direct Labor (152,000 / 10,000)	$15.20
Factory Overheads	$16.60
(0.4 machine hours at $41.50 per hour *)
Manufacturing cost per unit	$59.80

Factory overheads
Factory Rent	50000
Factory Supplies	45000
Factory Depreciation	15000
Factory manager's Salary	56000
Total Factory Overheads	166000
Budgeted total machine hours	4000
Overhead rate per machine hour *	41.50