Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 6

Components of Full Costs

Gibson Corporation has compiled the following information from the accounting system for the one product it sells:

Sales price	$300 per unit
Fixed costs (for the month)
Marketing and administrative	$36,000
Manufacturing overhead	$54,000
Variable costs (per unit)
Marketing and administrative	$6
Direct materials	$90
Manufacturing overhead	$20
Direct labor	$55
Units produced and sold (for the month)	1,800

Required

Determine each of the following unit costs:

a. Variable manufacturing cost.

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b. Variable cost.

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c. Full absorption cost.

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d. Full cost.

Step 1 of 10

Variable costs

Variable costs are the costs which varies with the output of quantity produced that is if the number of units produced increases then the variable cost would also increase.