Variable costing unit product cost $ 779.
Manufactured merchandise is bought.
Units in beginning inventory 0
Units produced 13,000
Units sold 9,000
Units in ending inventory 4,000
Variable costs per unit:
Direct materials $ 220
Direct labor $ 500
Variable manufacturing overhead $ 59
Variable selling and administrative $ 24
Fixed costs:
Fixed manufacturing overhead $ 790,000
Fixed selling and administrative $ 580,000
1. Under absorption costing, all manufacturing costs (variable and fixed) are included in product costs.
Direct materials $ 220
Direct labor 500
Variable manufacturing overhead 59
Fixed manufacturing overhead
($790,000 ÷ 13,000 units) 61
Absorption costing unit product cost $ 840
Under variable costing, only the variable manufacturing costs are included in product costs.
Direct materials $ 220
Direct labor 500
Variable manufacturing overhead 59
Hence, Variable costing unit product cost $ 779.
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