Question

Adamson, Inc. has the following cost data for Product X: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $ 41 per unit 57 per unit 7 per unit 20,000 per year Learning Objective 2 Calculate the unit product cost using absorption costing and variable costing when production is 2,000 units, 2,500 units, and 5,000 units.

Answer 1

Answer and Explanation:

The computation of the unit product cost using absorption costing and variable costing is shown below

Under absorption costing

Particulars                   2,000 units             2,500 units               5,000 units

Direct materials per unit     $41                      $41                        $41

Direct labor per unit            $57                     $57                        $57

Variable manufacturing                

overhead per unit                $7                        $7                         $7

Fixed manufacturing

overhead per unit                $10                      $8                         $4

 ($20,000 ÷ 2,000 units)   ($20,000 ÷ 2,500 units)      ($20,000 ÷ 5,000 units)

Unit product cost                 $115                     $113                      $109

Under variable costing

Particulars                   2,000 units             2,500 units               5,000 units

Direct materials per unit     $41                      $41                        $41

Direct labor per unit            $57                     $57                        $57

Variable manufacturing                

overhead per unit                $7                        $7                         $7

Unit product cost                 $105                     $105                    $105