Hossack Corporation produces a single product and has the following cost structure: The unit product cost under absorption costing is:
A)$231 per unit
B)$103 per unit
C)$133 per unit
D)$102 per unit

Question

Hossack Corporation produces a single product and has the following cost structure:  The unit product cost under absorption costing is:
A)$231 per unit 
B)$103 per unit 
C)$133 per unit 
D)$102 per unit

Quizplus · Accepted Answer

Unit Product Cost under Absorption Costing = Direct Materials + Direct Labor + Manufacturing Overhead
Manufacturing Overhead under Absorption Costing = Fixed Manufacturing Overhead + (Actual Units Produced x Variable Overhead Rate Per Unit)
Fixed Manufacturing Overhead = $420,000
Variable Overhead Rate Per Unit = ($230,000 ÷ 46,000 units) = $5 per unit
Manufacturing Overhead = $420,000 + (46,000 units x $5 per unit) = $670,000
Unit Product Cost = $50 + $30 + ($670,000 ÷ 46,000 units) = $133
Therefore, the correct answer is C.

Hossack Corporation Produces a Single Product and Has the Following