Labadie 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 25,000 units and sold 22,000 units. The company's only product is sold for $251 per unit.Assume that the company uses a variable costing system that assigns $23 of direct labor cost to each unit that is produced. The unit product cost under this costing system is:
A) $181 per unit
B) $117 per unit
C) $94 per unit
D) $215 per unit

Question

Labadie 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 25,000 units and sold 22,000 units. The company's only product is sold for $251 per unit.Assume that the company uses a variable costing system that assigns $23 of direct labor cost to each unit that is produced. The unit product cost under this costing system is:
A) $181 per unit 
B) $117 per unit 
C) $94 per unit 
D) $215 per unit

Quizplus · Accepted Answer

Under variable costing system, per unit product cost is calculated by adding up all the variable manufacturing costs associated with a unit, which includes direct materials, direct labor, and variable manufacturing overhead costs.

Given, 
Direct Labor Cost per unit = $23
Variable Manufacturing Overhead costs = 0

Therefore,

Unit Product Cost = Direct Materials Cost + Direct Labor Cost + Variable Manufacturing Overhead Cost
Unit Product Cost = $105 + $23 + $0
Unit Product Cost = $128

Hence, the unit product cost under the variable costing system is $128 per unit, which matches with option B).

Labadie Corporation Manufactures and Sells One Product