Computation of Product Unit Cost MS Company uses job order costing to determine

Question

Computation of Product Unit Cost MS Company uses job order costing to determine the product unit cost of one of its products based on the following costs incurred during March: liability insurance, manufacturing, $3,500; rent, sales office, $3,000; depreciation, manufacturing equipment, $5,000; direct materials, $34,000; indirect labor, manufacturing, $3,600; indirect materials, $2,000; heat, light, and power, manufacturing, $2,500; fire insurance, manufacturing, $2,400; depreciation, sales equipment, $5,000; rent, manufacturing, $4,000; direct labor, $20,000; manager's salary, manufacturing, $4,800; president's salary, $6,000; sales commissions, $8,000; and advertising expenses, $3,000. The Inspection Department reported that 40,900 good units were produced during March.

Determine the unit product cost. $ per unit

Explanation / Answer

Product Unit Cost= (Direct Materials Cost+Direct labour Cost+Overhead Cost) / Number of Unit Produced. Direct Materials Cost per unit+Direct Labour Cost per unit+Overhead Cost per unit Product Unit Cost= 1 Cost of Material used: Materials, Inventory beginning              -   Direct Material Purchased       34,000 Cost of Material Available for use       34,000 Less: Materials, Inventory ending              -   Cost of Material used       34,000 2 Total Manufacturing Cost: Cost of Materials used       34,000 Direct labour Cost+Factory Manager Salary       24,800 Overhead Cost: Indirect labour       3,600 Indirect material       3,600 Plant Supervision       2,000 Factory Insurance       3,500 Fire Insurance       2,400 Utilities, factory (Heat, Light, power)       2,500 Depreciation Factory Building            -   Depreciation , Factory Equipment       5,000 Factory rent       4,000 Factory security            -   factory repair and maintenance            -         26,600 Total Manufacturing Cost       85,400 3 Cost of goods manufactured: Total Manufacturing Cost       85,400 Add: Work in process inventory, beginning              -   Total cost of work in process during the year       85,400 Less: Work in process inventory, ending              -   Cost of goods manufactured:       85,400 4 Actual product unit cost: Number of Goods manufactured     40,900 Cost of Goods manufactured / number of units manufactured = 85,400 / 40,900 Actual product unit cost= 2.088 Therefore, The unit product cost would be $2.088 per unit.

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