Given the following data, total product cost per unit under variable costing is $10.75.
$$\begin{array} { | l | c | }
\hline \text { Direct labor } & \$ 7 \text { per unit } \
\hline \text { Direct materials } & \$ 1 \text { per unit } \
\hline \text { Overhead } & \
\hline \text { Total variable overhead } & \$ 20,000 \
\hline \text { Total fixed overhead } & \$ 90,000 \
\hline & \
\hline \text { Expected units to be produced } & 40,000 \text { units } \
\hline
\end{array}$$

Question

Given the following data, total product cost per unit under variable costing is $10.75.
 $$\begin{array} { | l | c | } 
\hline \text { Direct labor } & \$ 7 \text { per unit } \
\hline \text { Direct materials } & \$ 1 \text { per unit } \
\hline \text { Overhead } & \
\hline \text { Total variable overhead } & \$ 20,000 \
\hline \text { Total fixed overhead } & \$ 90,000 \
\hline & \
\hline \text { Expected units to be produced } & 40,000 \text { units } \
\hline
\end{array}$$

Quizplus · Accepted Answer

Under variable costing, only variable costs are included in the product cost per unit. The variable costs per unit are direct labor ($7), direct materials ($1), and variable overhead ($20,000/40,000 units = $0.50). Therefore, the total product cost per unit is $7 + $1 + $0.50 = $8.50, not $10.75.

Given the Following Data, Total Product Cost Per Unit Under