The following information refers to the Cowan Company's past year of operations.
*Common overhead totals $50,000 and is divided equally between the two products.
**Common fixed selling totals $60,000 and is divided equally between the two products.
Budgeted fixed overhead for the year of $180,000 equalled actual fixed overhead. Fixed overhead is assigned to products using a plant-wide rate based on expected direct labour hours, which were 150,000. The company had 5,000 of Product B in inventory at the beginning of the year. These units had the same unit cost as the units produced during the year.
-The unit product cost for Product B using absorption costing is
A) $3.16.
B) $2.80.
C) $2.60.
D) $2.45.

Question

The following information refers to the Cowan Company's past year of operations.
    *Common overhead totals $50,000 and is divided equally between the two products.
**Common fixed selling totals $60,000 and is divided equally between the two products.
Budgeted fixed overhead for the year of $180,000 equalled actual fixed overhead. Fixed overhead is assigned to products using a plant-wide rate based on expected direct labour hours, which were 150,000. The company had 5,000 of Product B in inventory at the beginning of the year. These units had the same unit cost as the units produced during the year.
-The unit product cost for Product B using absorption costing is
A) $3.16. 
B) $2.80. 
C) $2.60. 
D) $2.45.

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs (fixed and variable) in the unit product cost. The correct unit product cost for Product B using absorption costing is $3.16.

The Following Information Refers to the Cowan Company's Past Year