[The following information applies to the questions displayed below.] Diego Comp

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[The following information applies to the questions displayed below.]

Diego Company manufactures one product that is sold for $80 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 51,000 units and sold 47,000 units.

The company sold 34,000 units in the East region and 13,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expenses is traceable to the West region, $200,000 is traceable to the East region, and the remaining $30,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

Diego Company manufactures one product that is sold for $80 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 51,000 units and sold 47,000 units.

Explanation / Answer

Calculation of product variable cost:-

Particulars Amount

Direct materials $30

Direct labor $18

Variable manufacturing overhead $2

Unit product cost $50

Note:- Selling and administrative expenses (both variable and fixed) are not relevant for the computation of unit product cost.

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