Mentor Corp. has provided the following information for the current year: Units produced 3,500 units Sale price $ 200 per unit Direct materials $ 70 per unit Direct labor $ 55 per unit Variable manufacturing overhead $ 20 per unit Fixed manufacturing overhead $ 350,000 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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andromache andromache · Answer 1 · 2019-08-12T12:31:22+02:00

Answer:

Hence, the unit product cost using absorption costing is $318

Explanation:

For computing the unit product cost, the following things is need to be considered.

1. Direct material = Production units × per unit material price

= 3,500 × $70

=$245,000

2. Direct labor = Production units × per unit labor price

= 3,500 × $55

= $192,500

3. Variable manufacturing overhead = Production units × per unit variable manufacturing price

= 3,500 × 20

= 70,000

4. Fixed manufacturing overhead = $350,000

6. Variable selling and administrative cost = Production units × per unit varaible selling price

= 3,500 × 30

= $105,000

7. Fixed selling and administrative costs = $150,000

Now add these all items and divide by number of units.

So, total cost is equal to

= $245,000 + $192,500 + $70,000 + $350,000 + $105,000 + $150,000

= $1,112,500

And, units produced is = 3,500 units

So, unit product cost = Total cost ÷ units produced

= $1,112,500 ÷ 3,500

= $318

Hence, the unit product cost using absorption costing is $318