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Sprinkle Co. sells its product for $60 per unit. During 2019, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses.
-The per unit manufacturing cost under absorption costing is
A) $24.
B) $27.
C) $39.
D) $40.

Question

Use the following information for questions 
Sprinkle Co. sells its product for $60 per unit. During 2019, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses.
-The per unit manufacturing cost under absorption costing is
A) $24.
B) $27.
C) $39.
D) $40.

Quizplus · Accepted Answer

Under absorption costing, the per unit manufacturing cost includes direct materials, direct labor, variable overhead, and a portion of fixed manufacturing overhead. The calculation is as follows: Direct materials ($15) + Direct labor ($9) + Variable overhead ($3) + Fixed manufacturing overhead allocated per unit ($720,000 / 60,000 units = $12) = $39 per unit.

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