Dorothy Products sells its products for $40 per unit. Additional data for the month of April, 2014, are as follows: Calculate the product cost per unit produced using absorption costing.

Question

Dorothy Products sells its products for $40 per unit. Additional data for the month of April, 2014, are as follows:  Calculate the product cost per unit produced using absorption costing.

Quizplus · Accepted Answer

The product cost per unit using absorption costing includes both fixed and variable manufacturing overhead costs. Given the data, total manufacturing overhead costs for the month were $140,000 and total production was 11,000 units. Therefore, the product cost per unit would be calculated as follows:
Product cost per unit = (Total manufacturing overhead costs / Total production) + Direct materials per unit + Direct labor per unit
Product cost per unit = ($140,000 / 11,000) + $10 + $2.50
Product cost per unit = $12.50 per unit

Dorothy Products Sells Its Products for $40 Per Unit