Asked by Madison Forte on Apr 25, 2024
Verified
Shore Company reports the following information regarding its production cost. 
Compute product cost per unit under absorption costing.
A) $57.00
B) $60.39
C) $47.00
D) $23.00
E) $24.00
Absorption Costing
Absorption costing is an accounting method that includes all manufacturing costs - direct labor, direct materials, and both variable and fixed manufacturing overhead - in the cost of a product.
Product Cost
The total cost associated with making or acquiring a product, including materials, labor, and overhead expenses.
- Understand cost calculations under absorption costing.
Verified Answer
MS
Madusha Suranga7 days ago
Final Answer :
B
Explanation :
Under absorption costing, the product cost per unit includes both variable and fixed manufacturing costs.
Total manufacturing overhead cost = $36,000 + $78,000 = $114,000
Total units produced = 4,000 + 6,000 = 10,000 units
Therefore, manufacturing overhead cost per unit = $114,000/10,000 = $11.40
Product cost per unit = Direct materials cost per unit + Direct labor cost per unit + Manufacturing overhead cost per unit
Product cost per unit = $20 + $18 + $11.40 = $49.40
Add the per-unit amount for the fixed manufacturing overhead to arrive at the Absorption Costing product cost per unit as $60.39.
Total manufacturing overhead cost = $36,000 + $78,000 = $114,000
Total units produced = 4,000 + 6,000 = 10,000 units
Therefore, manufacturing overhead cost per unit = $114,000/10,000 = $11.40
Product cost per unit = Direct materials cost per unit + Direct labor cost per unit + Manufacturing overhead cost per unit
Product cost per unit = $20 + $18 + $11.40 = $49.40
Add the per-unit amount for the fixed manufacturing overhead to arrive at the Absorption Costing product cost per unit as $60.39.
Learning Objectives
- Understand cost calculations under absorption costing.