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Chapter 21: Q6SE (page 1168)

Computing absorption cost per unit and variable cost per unit

Adamson, Inc. has the following cost data for Product X:

Direct materials $ 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per year

Calculate the unit product cost using absorption costing and variable costing when production is 2,000 units, 2,500 units, and 5,000 units.

Short Answer

Expert verified

Answer

  • Total unit product cost under absorption costing is $115, $113, $109 for production 2,000, 2,500, 5,000 respectively.
  • Total unit product cost under variable costing is $105, $105, $105 for production 2,000, 2,500, 5,000 respectively.

Step by step solution

01

Calculation of unit product cost using absorption costing

Particulars

2,000

Units

2,500

Units

5,000

Units

Direct material

$41

$41

$41

Direct labor

$57

$57

$57

Variable manufacturing overhead

$7

$7

$7

Fixed manufacturing overhead

$20,000/2,000

=$10

$20,000/2,500

=$8

$20,000/5,000

=$4

Total unit product cost

$115

$113

$109

02

Calculation of unit product cost using variable costing

Particulars

2,000

Units

2,500

Units

5,000

Units

Direct material

$41

$41

$41

Direct labor

$57

$57

$57

Variable manufacturing overhead

$7

$7

$7

Total unit product cost

$105

$105

$105

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Most popular questions from this chapter

Computing inventory balances

Zeng Company reports the following data:

Finished Goods Inventory:

Beginning balance, in units 300 Units

Produced 2,900

Units sold (1,600)

Ending balance, in units 1,600

Production Costs: Variable manufacturing costs per unit $ 57

Total fixed manufacturing costs 26,100

Calculate the product cost per unit and the total cost of the 1,600 units in ending inventory using absorption costing and variable costing.

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For each type of customer, determine both the contribution margin per customer and the contribution margin ratio. Round to two decimal places.

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Using variable costing, service company Sherman Company provides carpet cleaning services to commercial and residential customers. Using the data below, determine the contribution margin ratio for each business segment, rounded to two decimal places:

When should a company use absorption costing when setting sales prices? When should it use variable costing?

Pierce Company had the following costs:

Units produced

500 units Manufacturing costs:

Direct materials

$ 25 per unit Direct labor

45 per unit Variable manufacturing overhead

15 per unit Fixed manufacturing overhead

5,000 per year Selling and administrative costs:

Variable selling and administrative costs

30 per unit Fixed selling and administrative costs

3,200 per year

Calculate the unit product cost using absorption costing and variable costing
See all solutions

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