Shore Company reports the following information regarding its production cost.
$$\begin{array} { l l }
\text { Units produced } & 28,000 \text { units } \
\text { Direct labor } & \$ 23 \text { per unit } \
\text { Direct materials } & \$ 24 \text { per unit } \
\text { Variable overhead } & \$ 280,000 \text { in total } \
\text { Fixed overhead } & \$ 94,920 \text { in total }
\end{array}$$
Compute production cost per unit under absorption costing.

Question

Shore Company reports the following information regarding its production cost. 
$$\begin{array} { l l } 
\text { Units produced } & 28,000 \text { units } \
\text { Direct labor } & \$ 23 \text { per unit } \
\text { Direct materials } & \$ 24 \text { per unit } \
\text { Variable overhead } & \$ 280,000 \text { in total } \
\text { Fixed overhead } & \$ 94,920 \text { in total }
\end{array}$$
Compute production cost per unit under absorption costing.

Quizplus · Accepted Answer

Under absorption costing, production cost per unit includes direct labor, direct materials, variable overhead per unit, and fixed overhead per unit. The variable overhead per unit is $280,000 / 28,000 = $10. The fixed overhead per unit is $94,920 / 28,000 = $3.39. Therefore, the total cost per unit is $23 (direct labor) + $24 (direct materials) + $10 (variable overhead) + $3.39 (fixed overhead) = $60.39.

Shore Company Reports the Following Information Regarding Its Production Cost