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 49,000 units and sold 45,000 units. The company's only product is sold for $233 per unit.Assume that the company uses an absorption costing system that assigns $11 of direct labor cost and $75 of fixed manufacturing overhead to each unit that is produced. The unit product cost under this costing system is:
A) $94 per unit
B) $180 per unit
C) $105 per unit
D) $210 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 49,000 units and sold 45,000 units. The company's only product is sold for $233 per unit.Assume that the company uses an absorption costing system that assigns $11 of direct labor cost and $75 of fixed manufacturing overhead to each unit that is produced. The unit product cost under this costing system is:
A) $94 per unit 
B) $180 per unit 
C) $105 per unit 
D) $210 per unit

Quizplus · Accepted Answer

Under an absorption costing system, the unit product cost includes both variable and fixed manufacturing costs. The given information tells us that the company assigns $11 of direct labor cost and $75 of fixed manufacturing overhead to each unit produced.

Therefore, the total per unit cost is:

Direct materials cost + Direct labor cost + Variable manufacturing overhead per unit + Fixed manufacturing overhead per unit
= $0 + $11 + $0 + $75
= $86 per unit

Adding the per unit cost of direct materials and manufacturing overhead with the per unit cost of direct labor gives us:

Direct materials cost + Direct labor cost + Manufacturing overhead cost per unit
= $0 + $11 + $75
= $86 per unit

Finally, adding the per unit cost of the product with the per unit cost of all the manufacturing costs gives us the total per unit cost:

Total unit cost
= Unit product cost + Manufacturing overhead cost per unit
= $233 + $86
= $319 per unit

Therefore, the unit product cost under this costing system is $180 per unit ($11 + $75 + $94).

Tremble Corporation Manufactures and Sells One Product