Farron Corporation, which has only one product, has provided the following data
ID: 2596958 • Letter: F
Question
Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price
$92
Units in beginning inventory
0
Units produced
8,700
Units sold
8,300
Units ending inventory
400
Variable costs per unit:
Direct materials
$13
Direct labor
$55
Variable manufacturing overhead
$1
Variable selling and administrative
$5
Fixed costs:
Fixed manufacturing overhead
$130,500
Fixed selling and administrative
$8,300
What is the unit product cost for the month under absorption costing?
$74 per unit
$89 per unit
$69 per unit
$84 per unit
Selling price
$92
Units in beginning inventory
0
Units produced
8,700
Units sold
8,300
Units ending inventory
400
Variable costs per unit:
Direct materials
$13
Direct labor
$55
Variable manufacturing overhead
$1
Variable selling and administrative
$5
Fixed costs:
Fixed manufacturing overhead
$130,500
Fixed selling and administrative
$8,300
Explanation / Answer
Fixed manufacturing overhead/unit=(130500/8700)=$15
Hence unit product cost=Direct materials+Direct labor+Variable overhead+Fixed manufacturing overhead
=(13+55+1+15)
which is equal to
=$84 per unit.
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