SKM Innovations, Inc., anticipates producing 40,000 units and incurring the following manufacturing costs for the coming year: raw material, $35 per unit; direct labor, $50 per unit; manufacturing overhead, $1,200,000 + $40 per unit.Using direct costing, the unit cost for the coming year will be:

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Direct costing includes only variable costs. The unit cost is the sum of raw material ($35), direct labor ($50), and variable manufacturing overhead ($40), totaling $125.