Cuffee Inc., which produces a single product, has provided the following data fo

Question

Cuffee Inc., which produces a single product, has provided the following data for its most recent month of operation:

The company had no beginning or ending inventories.

Compute the unit product cost under absorption costing. (Omit the "$" sign in your response.)

Compute the unit product cost under variable costing. (Omit the "$" sign in your response.)

  Number of units produced 16,900   Variable costs per unit:   Direct materials $ 157   Direct labor $ 79   Variable manufacturing overhead $ 12   Variable selling and administrative expenses $ 12   Fixed costs:   Fixed manufacturing overhead $ 929,500   Fixed selling and administrative expenses $ 371,800

Explanation / Answer

Part A)

The unit product cost under absorption costing would comprise of variable production costs and fixed manufacturing overhead costs. The formula for calculating unit product cost is given below:

Unit Product Cost = Direct Material + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead

__________

Using the information provided in the question, we get,

Unit Product Cost (Absorption Costing) = 157 + 79 + 12 + (929,500)/16,900 = $303

__________

Part B)

The unit product cost under variable costing would comprise of variable production costs only. The formula for calculating unit product cost is given below:

Unit Product Cost = Direct Material + Direct Labor + Variable Manufacturing Overhead

__________

Unit Product Cost (Variable Costing) = 157 + 79 + 12 = $248

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