Tremble Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 68,000 units and sold 65,600 units. The company's only product is sold for $278 per unit.Assume that the company uses an absorption costing system that assigns $17 of direct labor cost and $60 of fixed manufacturing overhead to each unit that is produced. The unit product cost under this costing system is:
A) $106 per unit
B) $183 per unit
C) $123 per unit
D) $254 per unit

Question

Tremble Corporation manufactures and sells one product. The following information pertains to the company's first year of operations:  The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 68,000 units and sold 65,600 units. The company's only product is sold for $278 per unit.Assume that the company uses an absorption costing system that assigns $17 of direct labor cost and $60 of fixed manufacturing overhead to each unit that is produced. The unit product cost under this costing system is:
A) $106 per unit 
B) $183 per unit 
C) $123 per unit 
D) $254 per unit

Quizplus · Accepted Answer

The unit product cost under absorption costing can be calculated using the following formula:

Unit Product Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead

Since the company does not have any variable manufacturing overhead costs, the formula can be simplified as:

Unit Product Cost = Direct Materials + Direct Labor + Fixed Manufacturing Overhead

Plugging in the given numbers, we get: 
Unit Product Cost = $0 + $17 + $60 
Unit Product Cost = $77

Therefore, the unit product cost under the absorption costing system is $77 per unit.

Tremble Corporation Manufactures and Sells One Product