Math Problem Statement
Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price
Units in beginning inventory O
Units produced
Units sold
$ 78
8,800
8,700
Units in ending inventory 100
Variable costs per unit:
Direct materials
Direct labor
Variable manufacturing overhead
$ 18
$ 10
$4
Variable selling and administrative expense $ 5
Fixed costs:
Fixed manufacturing overhead
$ 255,200
Fixed selling and administrative expense $ 87,000
What is the unit product cost for the month under absorption costing?
• $32 per unit
O $61 per unit
O $37 per unit
• $66 per unit
Solution
To calculate the unit product cost under absorption costing, we need to account for both the variable manufacturing costs and the allocated fixed manufacturing overhead.
Step-by-Step Calculation
-
Calculate Total Variable Manufacturing Cost per Unit
- Direct materials: $18
- Direct labor: $10
- Variable manufacturing overhead: $4
Total Variable Manufacturing Cost per Unit = $18 + $10 + $4 = $32
-
Calculate Fixed Manufacturing Overhead per Unit
- Fixed manufacturing overhead = $255,200
- Units produced = 8,800
Fixed Manufacturing Overhead per Unit = $255,200 / 8,800 = $29
-
Calculate Unit Product Cost under Absorption Costing Absorption costing includes both variable manufacturing costs and fixed manufacturing overhead.
Conclusion
The unit product cost for the month under absorption costing is $61 per unit.
Answer
The correct answer is: $61 per unit
Would you like more details or have any questions?
Related Questions
- How would the unit product cost change if the fixed manufacturing overhead increased?
- What would the unit product cost be under variable costing?
- How does absorption costing differ from variable costing in terms of fixed overhead treatment?
- What is the impact of ending inventory on absorption costing profit?
- How would selling and administrative expenses impact the overall net profit?
Tip: Absorption costing spreads fixed manufacturing costs across all units produced, which can affect inventory valuation and profit when inventory levels change.
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Math Problem Analysis
Mathematical Concepts
Absorption Costing
Unit Product Cost
Fixed and Variable Costs
Formulas
Total Variable Manufacturing Cost per Unit = Direct materials + Direct labor + Variable manufacturing overhead
Fixed Manufacturing Overhead per Unit = Fixed manufacturing overhead / Units produced
Unit Product Cost under Absorption Costing = Total Variable Manufacturing Cost per Unit + Fixed Manufacturing Overhead per Unit
Theorems
-
Suitable Grade Level
College level (Accounting/Finance)
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