Question

Josh’s Manufacturing Company reported fixed manufacturing overhead of $2,500,000, and 2,600,000 total units. The variable manufacturing costs were $1.50 per unit. What is the cost per unit using absorption costing?

Answer 1

Answer:

$0.54

Explanation:

Given: Fixed manufacturing overhead = $2500000.

           Total number of unit= 2600000.

            The variable manufacturing costs= $1.50 per unit.

First finding the cost per unit of manufacturing overhead.

Cost per unit of manufacturing overhead= $\frac{Fixed\ manufacturing\ overhead}{Total\ number\ of\ units}$

⇒ Cost per unit of manufacturing overhead= $\frac{2500000}{2600000}$

∴ Cost per unit of manufacturing overhead= $0.96154

Next finding the cost per units using absorption costing.

Cost per unit= $Per\ unit\ variable\ manufacturing\ cost - Per\ unit\ cost\ of\ fixed\ manufacturing\ overhead$⇒ Cost per unit= $\ 1.50 -\ 0.96154$

∴ Cost per unit= $0.5384 \approx \ 0.54$

Hence, $0.54 is the cost per unit using absorption costing.