Question

Baraban Corporation has provided the following data for its most recent year of operation:

Selling price per unit	$	47
Manufacturing costs:
Variable manufacturing cost per unit produced:
Direct materials	$	10
Direct labor	$	6
Variable manufacturing overhead	$	5
Fixed manufacturing overhead per year	$	130,000
Selling and administrative expenses:
Variable selling and administrative expense per unit sold	$	5
Fixed selling and administrative expense per year	$	63,000

Units in beginning inventory	0
Units produced during the year	10,000
Units sold during the year	9,000
Units in ending inventory	1,000

The unit product cost under variable costing is closest to:

$34.00

$39.00

$21.00

$26.00

Answer 1

The product cost under variable costing only include Variable manufacturing cost.

Fixed manufacturing overhead DO NOT form part of product cost. Also, Selling & administrative (fixed or variable) overhead do not form part of the product cost under variable costing or absorption costing.

hence, Unit product cost under variable costing will be:

Direct material $10
Direct labor $6
variable manufacturing Overhead $5

Total Unit product cost = 10 + 6 + 5 = $21 per unit

Hence, the correct answer is Option 3rd: $21