A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000.
- The total product cost per unit under absorption costing is:

Question

Quizplus · Accepted Answer

Under absorption costing, all direct costs and both fixed and variable overhead costs are included in product cost. The total cost per unit in this scenario would be:
Direct materials = $10 per unit
Direct labor = $6 per unit
Variable overhead = $70,000/10,000 units = $7 per unit
Total fixed overhead = $120,000
Total units produced = 10,000
Total cost per unit = (direct materials + direct labor + variable overhead + (total fixed overhead/total units produced))
Total cost per unit = ($10 + $6 + $7 + ($120,000/10,000)) = $35 per unit.

A Manufacturer Reports the Following Costs to Produce 10,000 Units