Khanam Corporation, which has only one product, has provided the following data

Question

Khanam Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $131 Units in beginning inventory 0 Units produced 6,700 Units sold 6,400 Units in ending inventory 300 Variable costs per unit: Direct materials $20 Direct labor $50 Variable manufacturing overhead $14 Variable selling and administrative $14 Fixed costs: Fixed manufacturing overhead $180,900 Fixed selling and administrative $26,400 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the unit product cost for the month under absorption costing? $111 per unit $84 per unit $98 per unit $125 per unit

Explanation / Answer

Answer is option 1 = 111 per unit

Summarizing the given data Variable cost per unit Direct Material 20 Direct labor 50 Variable manufacturing overhead 14 Total Variable cost of producing per unit 84 Variable cost of producing 6700 Units 562800 = 6700 units x 98 Fixed cost - Manufacturing overheads 180900 Total cost of producing 6700 units 743700 Per unit cost 111 = Cost of production / units manufactured = 743700 / 6700 = 111 Variable selling and fixed selling are not to be considered as these are not associated with manufacturing of product

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