22. Ross Corporation produces a single product. The company has direct materials

Question

22. Ross Corporation produces a single product. The company has direct materials costs of $8 per unit, direct labor costs of $6 per unit, and manufacturing overhead of $10 per unit. Sixty percent of the manufacturing overhead is for fixed costs. In addition, variable selling and administrative expenses are $2 per unit, and fixed selling and administrative expenses are $3 per unit at the current activity level. Assume that direct labor is a variable cost.

Under absorption costing, the unit product cost is:

4 per unit

$29 per unit

$20 per unit

$26 per unit

Explanation / Answer

Under absorption costing, the unit product cost is=Direct material+Direct labor+Variable manufacturing overhead+Fixed  manufacturing overhead

=(8+6+(10*0.4)+(10*0.6))

which is equal to

=$24 per unit.

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