Abigail Corporation produces widgets. In 2008, its first year of operations, the

Question

Abigail Corporation produces widgets. In 2008, its first year of operations, the company produced 100,000 widgets and sold 90,000 widgets. The selling price is $70 per widget.

The production costs are
Direct Materials $10 per widget
Direct Labor $5 per widget
Variable Manufacturing Overhead $12 per widget
Fixed Manufacturing Overhead $600,000 in total

The company also had fixed selling costs of $100,000 and fixed administration costs of $150,000

What is the product cost of one widget using the variable costing method?

Explanation / Answer

Type of Cost

Variable Costing

Product cost of one widget using the variable costing method:

Type of Cost

Variable Costing

Direct materials $10 Direct labor $5 Variable manufacturing overhead $12 Manufacturing cost per unit $27

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