Question

A manufacturing company has provided the following data concerning its most recent month of operations: Units in beginning inventory…………………… 0 Units produced…………………………………. 4,800 Units sold………………………………………. 4,700 Units in ending inventory……………………… 100 Variable costs per unit: Direct materials………………………………… $30 Direct labor…………………………………….. 52 Variable manufacturing overhead……………… 3 Variable selling and administrative….…………. 7 Fixed costs: Fixed manufacturing overhead…………………. $72,000 Fixed selling and administrative……………….. 9,400 What is the unit product cost for the month under variable costing?

a. $92.

b. $107.

c. $100.

d. $85.

Answer 1

Answer- a. $92

Explanation-

Under Variable costing approach the product cost is limited to the variable production cost only. Fixed costs are not included in the unit cost of production.

Accordingly,

Unit product cost for the month under variable costing = $92

Calculation of unit cost are as under.-

Direct materials…………………...........…$30

Direct labor……………………………………..$ 52

Variable manufacturing overhead. $ 3

Variable selling and administrative.$ 7

Total unit Cost = ..............................$92 per unit.

($30 + $52 + $3 + $7 ) = $92.