Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 44,000 units and sold 36,000 units at a price of $140 per unit.

Manufacturing costs

Direct materials per unit $60

Direct labor per unit $22

Variable overhead per unit $8

Fixed overhead for the year $528,000

Selling and administrative costs

Variable selling and administrative cost per unit $11

Fixed selling and administrative cost per year $105,000

Assume the company uses absorption costing.

Determine its product cost per unit.

Question

Business

Adrienne Clark

12 November, 13:45

Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 44,000 units and sold 36,000 units at a price of $140 per unit.

Manufacturing costs

Direct materials per unit $60

Direct labor per unit $22

Variable overhead per unit $8

Fixed overhead for the year $528,000

Selling and administrative costs

Variable selling and administrative cost per unit $11

Fixed selling and administrative cost per year $105,000

Assume the company uses absorption costing.

Determine its product cost per unit.

+2

Answers (1)

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Amelia Bauer · Answer 1

The Cool Sky product cost per unit is $102.

Explanation:

To determine the product cost per unit using the absorption costing we find the per unit rate for Fixed Overheads for the year as follows,

Total Fixed overheads for the year / Units produced during the year

$528,000 / 44,000 unit = $12 per unit.

Total Cost per unit = Direct Material per unit + Direct labor per unit + Variable overhead per unit + Fixed Overhead per unit.

Total Cost per unit = $60 + $22 + $8 + $12

Total Cost per unit = $102 per unit.