Amarantha Corp. has provided the following data for the current year. Units produced 2,500 units Sales price $200 per unit Direct materials $75 per unit Direct labor $65 per unit Variable manufacturing overhead $25 per unit Fixed manufacturing overhead $225,000 per year Variable selling and administrative costs $30 per unit Fixed selling and administrative costs $150,000 per year Calculate the unit product cost using absorption costing.

Question

Business

Kaiden Wise

9 December, 06:34

Amarantha Corp. has provided the following data for the current year. Units produced 2,500 units Sales price $200 per unit Direct materials $75 per unit Direct labor $65 per unit Variable manufacturing overhead $25 per unit Fixed manufacturing overhead $225,000 per year Variable selling and administrative costs $30 per unit Fixed selling and administrative costs $150,000 per year Calculate the unit product cost using absorption costing.

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Jefferson Pope · Answer 1

Unit product cost = $255

Explanation:

Giving the following information:

Units produced 2,500

Direct materials $75 per unit

Direct labor $65 per unit

Variable manufacturing overhead $25 per unit

Fixed manufacturing overhead $225,000 per year

Under the absorption costing method, the unitary product cost is calculated using the direct material, direct labor, and unitary total overhead.

First, we need to determine the unitary fixed overhead:

Unitary fixed overhead = 225,000/2,500 = $90

Unit product cost = 75 + 65 + (25 + 90) = $255