The accounting records for Eisner Manufacturing Company included the following cost information relating to its first year of operations: $\begin{array}{lrr}
\text { Direct materials} &\$60,000\
\text { Direct labor } &\$80,000\
\text { Fixed manufacturing overhead} &\$100,000\
\text {Variable manufacturing overhead } &\$20,000\
\end{array}$

Assume the company produced 10,000 units of inventory and sold 6,000 of these units during the year for $192,000.The cost per unit under variable and absorption costing would be,respectively:
A) $5.00 and $11.00.
B) $16.00 and $26.00.
C) $14.00 and $10.00.
D) $19.00 and $30.00.

Question

The accounting records for Eisner Manufacturing Company included the following cost information relating to its first year of operations: $\begin{array}{lrr}
  \text {  Direct materials} &\$60,000\
 \text { Direct labor } &\$80,000\
 \text {  Fixed manufacturing overhead} &\$100,000\
 \text {Variable manufacturing overhead  } &\$20,000\
\end{array}$

Assume the company produced 10,000 units of inventory and sold 6,000 of these units during the year for $192,000.The cost per unit under variable and absorption costing would be,respectively:
A) $5.00 and $11.00.
B) $16.00 and $26.00.
C) $14.00 and $10.00.
D) $19.00 and $30.00.

Quizplus · Accepted Answer

Variable costing includes only variable costs (direct materials, direct labor, and variable manufacturing overhead) in the cost per unit, while absorption costing includes all manufacturing costs (direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead). Variable Costing per unit = (Direct Materials + Direct Labor + Variable Manufacturing Overhead) / Units Produced = ($60,000 + $80,000 + $20,000) / 10,000 = $16.00.Absorption Costing per unit = (Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead) / Units Produced = ($60,000 + $80,000 + $20,000 + $100,000) / 10,000 = $26.00.

The Accounting Records for Eisner Manufacturing Company Included the Following