Question

Given the following data, calculate the total product cost per unit under absorption costing. Direct labor $ 3.50 per unit Direct materials $ 1.25 per unit Overhead Total variable overhead $ 41,400 Total fixed overhead $ 150,000 Expected units to be produced 18,000 units $4.75 per unit $7.05 per unit $13.08 per unit $15.38 per unit $16 per unit

Answer 1

Answer: $15.35

Explanation: Under absorption costing method all the costs incurred are assigned to the produced units by the entity. So, we can compute it as :-

Total cost = Direct labor per unit + Direct material per unit + variable overhead per unit + Fixed overhead per unit

$Total\ cost$=$3.5+1.25$+$\frac{41,400}{18,000}+\frac{150,000}{18,000}$

.

Total cost = $ 3.50 + $ 1.25 + $2.3 + $8.3 = $15.35

Answer 2

Answer:

The total product cost per unit under absorption costing is $15.38 per unit

Explanation:

Absorption costing : Under absorption costing, all costs which is assigned in the production is recorded in this costing method. It includes direct labor cost, direct material cost, variable overhead cost, fixed overhead cost, etc.

The computation of total product cost per unit is shown below:

= Direct material per unit + direct labor per unit + variable overhead per unit + fixed overhead per unit

where,

Direct material and direct labor per unit is given but variable overhead per unit and fixed overhead per unit is not given so first we have to calculate these two cost per unit. The calculation is shown below:

Variable overhead per unit = Total variable overhead cost ÷ expected units to be produced

= $41,400 ÷ 18,000

= $2.3 per unit

Now for Fixed overhead per unit = Total fixed overhead cost ÷ expected units to be produced

=  $150,000 ÷ 18,000

=$8.33 per unit

So, total product cost per unit  = Direct material per unit + direct labor per unit + variable overhead per unit + fixed overhead per unit

= $1.25 + $3.5 + $2.3 + $8.33

= $15.38 per unit

Hence, the total product cost per unit under absorption costing is $15.38 per unit