Greg Corporation produces a single product and has the following cost structure:

ID: 2487007 • Letter: G

Question

Number of units produced each year: 13,000

Number of units sold: 20X1 13,000

Number of units sold: 20X2 8,000

Number of units sold: 20X3 18,000

Selling price: $ 125 / unit

Variable costs per unit:

Direct materials $14

Direct labor $18

Variable manufacturing overhead $ 7

Variable selling and administrative expenses $ 3

Fixed costs per year:

Fixed manufacturing overhead $ 91,000

Fixed selling and administrative expenses $110,000

Required:

1. Compute the unit product cost under absorption costing. Show your work!

2. Compute the unit product cost under variable costing. Show your work!

1. Under absorption costing, unit product cost consists of all manufacturing costs, fixed and variable:

2. Under variable costing, product cost includes all variable costs, manufacturing and non-manufacturing.

$ Direct material cost 14 Direct labor cost 18 Variable manufacturing overhead 7 Fixed manufacturing overhead ( $ 91,000 / 13,000) 7 Product cost 46

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