Shore Company reports the following information regarding its production cost. Compute product cost per unit under absorption costing.
A) $57.00
B) $60.39
C) $47.00
D) $23.00
E) $24.00

Question

Shore Company reports the following information regarding its production cost.  Compute product cost per unit under absorption costing.
A) $57.00 
B) $60.39 
C) $47.00 
D) $23.00 
E) $24.00

Quizplus · Accepted Answer

Under absorption costing, all manufacturing costs, both fixed and variable, are allocated to units of production. In this case, the total manufacturing cost per unit comes out to be:

Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead per unit
= $10 + $18 + $8 + (240,000/6,000)
= $10 + $18 + $8 + $40
= $76

The fixed manufacturing overhead per unit is calculated as:

Total fixed manufacturing overhead / Total units produced
= $240,000 / 6,000
= $40

Therefore, the product cost per unit under absorption costing is $76.

Shore Company Reports the Following Information Regarding Its Production Cost