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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

When units produced are less than units sold, how does operating income differ between variable costing and absorption costing? Why

When units produced equal units sold, how does operating income differ between variable costing and absorption costing?

Calculating contribution margin and operating income, variable costing

Calculate the contribution margin and operating income for June using variable costing.

Use the following information for Short Exercises S21-4 and S21-5.

Dracut Company reports the following information for June:

Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000

In the long run, all costs are controllable. Is this statement true? Why or why not?

Explain why the fixed manufacturing overhead cost per unit changes when there is a change in the number of units produced.
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