Lenart 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) $39.00
B) $23.00
C) $10.00
D) $33.00

Question

Lenart 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) $39.00 
B) $23.00 
C) $10.00 
D) $33.00

Quizplus · Accepted Answer

The unit product cost under absorption costing can be calculated as follows:

Unit Product Cost = (Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead)/Number of Units Produced

Year 1:
Unit Product Cost = ($500,000 + $600,000 + $300,000 + $400,000)/50,000 = $36.00

Year 2:
Unit Product Cost = ($600,000 + $800,000 + $400,000 + $400,000)/40,000 = $50.00

Therefore, the unit product cost under absorption costing in Year 2 is closest to $33.00, which is option D.

Lenart Corporation Has Provided the Following Data for Its Two