Question

Chip’s Woodworking manufactures and sells specialty wood plaques. The production manager reported that the company needs to produce an additional 1,000 plaques to meet customer demand in January. The managerial accountant needs to prepare an external report to show the inventoriable product cost per unit under the absorption costing system. Which of the following represents the cost per unit to produce an additional 1,000 plaques under the absorption costing system? Use the following data to compute your answer.
Chips Woodworking

Manufacturing Cost Report

January

Direct materials $6
Direct labor $10
Fixed manufacturing overhead $6,000
Variable manufacturing overhead $6
Fixed operating expenses (selling, general, and administrative) $2,000
Variable operating expenses (selling, general, and administrative $2

Unit Cost ?

Answer 1

Answer:

UNIT COST $32

Explanation:

the absorption costing system is the sum of expenses applicable to purchases and charges directly or indirectly incurred to produce a good or service.

This model considers both fixed and variable costs. Which translates into a higher unit cost.

in these case unit cost = 6+10+6+6+2+2 = 32

+Direct materials $6

+Direct labor $10

+Fixed manufacturing overhead $6,000  / 1000 units= $6

+Variable manufacturing overhead $6

+Fixed operating expenses (selling, general, and administrative) $2,000 / 1000 units=$2

Variable operating expenses (selling, general, and administrative $2