Question

Given the following data, calculate product cost per unit under variable costing. Direct labor $ 8 per unit Direct materials $ 3 per unit Overhead Total variable overhead $ 30,000 Total fixed overhead $ 85,000 Expected units to be produced 50,000 units

Answer 1

Solution:

As we need to measure costs due to variable expense, the fixed overhead is not taken into account.

Therefore, expense can be measured as follows per unit:

Cost per unit = Direct labor per unit + Direct material per unit  + variable overhead per unit                                                                                  

Cost per unit = $8 + 3 + \frac{30,000}{50,000}$

                     = 11 +0.6 = $11.6