Baraban Corporation has provided the following data for its most recent year of

Question

Baraban Corporation has provided the following data for its most recent year of operation:

The unit product cost under variable costing is closest to:

$34.00

$39.00

$21.00

$26.00

Selling price per unit $ 47 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 10 Direct labor $ 6 Variable manufacturing overhead $ 5 Fixed manufacturing overhead per year $ 130,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 5 Fixed selling and administrative expense per year $ 63,000

Explanation / Answer

The product cost under variable costing only include Variable manufacturing cost.

Fixed manufacturing overhead DO NOT form part of product cost. Also, Selling & administrative (fixed or variable) overhead do not form part of the product cost under variable costing or absorption costing.

hence, Unit product cost under variable costing will be:

Direct material $10
Direct labor $6
variable manufacturing Overhead $5

Total Unit product cost = 10 + 6 + 5 = $21 per unit

Hence, the correct answer is Option 3rd: $21

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