Foggs Corporation has provided the following data for its two most recent years of operation: The unit product cost under absorption costing in Year 2 is closest to:
A) $40.00
B) $21.00
C) $67.00
D) $61.00

Question

Foggs Corporation has provided the following data for its two most recent years of operation:  The unit product cost under absorption costing in Year 2 is closest to:
A) $40.00 
B) $21.00 
C) $67.00 
D) $61.00

Quizplus · Accepted Answer

Using the absorption costing method, the unit product cost for Year 2 can be calculated as follows:

Direct materials per unit = $20 
Direct labor per unit = $12 
Variable manufacturing overhead per unit = $3 
Fixed manufacturing overhead per unit = $26,000/10,000 = $2.60

Total unit product cost = $20 + $12 + $3 + $2.60 = $37.60

Adding in the per-unit amount for selling and administrative expenses of $23, the total unit product cost under absorption costing for Year 2 is:

$37.60 + $23 = $60.60, which is closest to option D: $61.00.

Foggs Corporation Has Provided the Following Data for Its Two