Question

Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 44,000 units and sold 36,000 units at a price of $140 per unit.

Manufacturing costs
Direct materials per unit $60
Direct labor per unit $22
Variable overhead per unit $8
Fixed overhead for the year $528,000
Selling and administrative costs
Variable selling and administrative cost per unit $11
Fixed selling and administrative cost per year $105,000
Assume the company uses absorption costing.

Determine its product cost per unit.

Answer 1

Answer:

The Cool Sky product cost per unit is $102.

Explanation:

To determine the product cost per unit using the absorption costing we find the per unit rate for Fixed Overheads for the year as follows,

Total Fixed overheads for the year / Units produced during the year

$528,000 / 44,000 unit = $12 per unit.

Total Cost per unit = Direct Material per unit + Direct labor per unit + Variable overhead per unit + Fixed Overhead per unit.

Total Cost per unit = $60 + $22 + $8 + $12

Total Cost per unit = $102 per unit.