A manufacturing company that produces a single product has provided the followin

Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the absorption costing unit product cost for the month?

Units in beginning inventory 0 Units produced 2,900 Units sold 2,600 Units in ending inventory 300 Variable costs per unit: Direct materials $ 49 Direct labor $ 58 Variable manufacturing overhead $ 6 Variable selling and administrative expense $ 11 Fixed costs: Fixed manufacturing overhead $ 55,100 Fixed selling and administrative expense $ 18,200

Explanation / Answer

Direct materials = 2900 * 49 = 142,100

Direct labour = 2,900 * 58 = 168,200

Variable manufacturing overhead = 2,900 * 6 = 17,400

Variable manufacturing costs = Direct materials + Direct labour + Variable manufacturing overhead

= 142,100 + 168,200 + 17,400

= 327,700

Fixed manufacturing costs = 55,100

Total product costs = Variable manufacturing costs + Fixed manufacturing costs

= 327,700 + 55,100

= 382,800

Unit product cost for the month = Total product costs / Units produced

= 382,800 / 2,900

= 132

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