Question

Absorption costing and product pricing LO P4 A manufacturer reports the following information on its product. Direct materials cost $ 41.00 per unit Direct labor cost $ 11.10 per unit Variable overhead cost $ 5.10 per unit Fixed overhead cost $ 1.10 per unit Target markup 50 % Compute the target selling price per unit under absorption costing.

Answer 1

Answer:

$87.45 per unit

Explanation:

The computation of the target selling price per unit is shown below:

= Direct material cost per unit + Direct labor cost per unit + variable overhead cost per unit +  Fixed overhead cost per unit + target markup cost per unit

= $41 per unit + $11.10 per unit + $5.10 per unit + $1.10 per unit +  $29.15 per unit

= $87.45 per unit

The computation of the target markup cost per unit is shown below:

= (Direct material cost per unit + Direct labor cost per unit + variable overhead cost per unit +  Fixed overhead cost per unit) × markup

= ($41 per unit + $11.10 per unit + $5.10 per unit + $1.10 per unit) × 50%

= $29.15 per unit