Question

If variable manufacturing costs are $16 per unit and total fixed manufacturing costs are $401,500, what is the manufacturing cost per unit if: a. 5,500 units are manufactured and the company uses the variable costing concept? $ b. 7,300 units are manufactured and the company uses the variable costing concept? $ c. 5,500 units are manufactured and the company uses the absorption costing concept? $ d. 7,300 units are manufactured and the company uses the absorption costing concept? $

Answer 1

Answer:

a. $16

b. $16

c. $89

d. $71

Explanation:

Variable Manufacturing Cost per Unit = Direct Materials + Direct Labor + Variable Overheads

Absorption Manufacturing Cost per Unit = Direct Materials + Direct Labor + Variable Overheads + Fixed Overheads

a. 5,500 units are manufactured and the company uses the variable costing

Unit Cost = Variable Costs per unit

                 =  $16

b. 7,300 units are manufactured and the company uses the variable costing concept

Unit Cost = Variable Costs per unit

                 =  $16

c. 5,500 units are manufactured and the company uses the absorption costing

Unit Cost = Variable Costs + Fixed Costs per unit

                 =  $16 + ($401,500/5,500)

                 = $16+$73

                 = $89

d. 7,300 units are manufactured and the company uses the absorption costing

Unit Cost = Variable Costs + Fixed Costs per unit

                 =  $16 + ($401,500/7,300)

                 = $16+$55

                 = $71