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?

a) $74 per unit

b) $89 per unit

c) $69 per unit

d) $84 per unit

Question

Business

Waller

5 April, 15:21

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?

a) $74 per unit

b) $89 per unit

c) $69 per unit

d) $84 per unit

+2

Answers (1)

Know the Answer?

Dominique Trevino · Answer 1

Unit product cost = $84

Explanation:

Giving the following information:

Units produced 8,700

Direct materials $13

Direct labor $55

Variable manufacturing overhead $1

Fixed manufacturing overhead $130,500

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

Unitary fixed overhead = 130,500/8,700 = $15

Unit product cost = 13 + 55 + 1 + 15 = $84