Question

A manufacturer reports the following costs to produce 10,000 units in its first year of operations:

Direct materials, $10 per unit
Direct labor, $6 per unit,
Variable overhead, $70,000
Fixed overhead, $120,000.

The total product cost per unit under absorption costing is:

a)$23 per unit.

b)$16 per unit.

c)$35 per unit.

d)$17 per unit.

e)$28 per unit.

Answer 1

Answer:

Option (C) is correct.

Explanation:

Variable overhead per unit:

= Variable overhead ÷ Total units produced

= $70,000 ÷ 10,000

= $7 per unit

Fixed overhead per unit:

= Fixed overhead ÷ Total units produced

= 120,000 ÷ 10,000

= $12 per unit

Total product cost:

= Direct materials + Direct labor + Variable overhead + Fixed overhead

= 10 + 6 + 7 + 12

= $35 per unit