White Company manufactures a single product and has the following cost structure

Question

White Company manufactures a single product and has the following cost structure:

               Variable costs per unit:

                              $3 Direct materials

                              $4 Direct labor

                              $1 Variable manufacturing overhead

                              $2 Variable selling and admin. expense   

               Fixed costs per month:

                              $100,000 Fixed manufacturing overhead

                              $ 60,000 Fixed selling and admin. Expense

The company produces 20,000 units each month. What is the unit product cost under absorption costing?

Explanation / Answer

Calculate unit product cost under absorption costing :

Unit product cost Direct material 3 Direct labour 4 variable manufacturing overhead 1 Fixed manufacturing overhead (100000/20000) 5 Unit product cost 13

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