Shore Company reports the following information regarding its production cost.
$\begin{array}{ll}
\text { Units produced } & 28,000 \text { units } \
\text { Direct labor } & \$ 23 \text { per unit } \
\text { Direct materials } & \$ 24 \text { per unit } \
\text { Variable overhead } & \$ 280,000 \mathrm{in} \text { total } \
\text { Fixed overhead } & \$ 94,920 \mathrm{in} \text { total }
\end{array}$

Compute production 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.
$\begin{array}{ll}
\text { Units produced } & 28,000 \text { units } \
\text { Direct labor } & \$ 23 \text { per unit } \
\text { Direct materials } & \$ 24 \text { per unit } \
\text { Variable overhead } & \$ 280,000 \mathrm{in} \text { total } \
\text { Fixed overhead } & \$ 94,920 \mathrm{in} \text { total }
\end{array}$

Compute production 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, the production cost per unit includes direct labor, direct materials, variable overhead per unit, and fixed overhead per unit. Variable overhead per unit is $280,000 / 28,000 = $10. Fixed overhead per unit is $94,920 / 28,000 = $3.39. Total cost per unit = $23 (direct labor) + $24 (direct materials) + $10 (variable overhead) + $3.39 (fixed overhead) = $60.39.

Shore Company Reports the Following Information Regarding Its Production Cost