Answer the following question(s)using the information below.Gabe's Auto produces and sells an auto part for $30.00 per unit.In 2012, 100,000 parts were produced and 75,000 units were sold.Other information for the year includes:

-What is the inventoriable cost per unit using absorption costing?
A)$14.25
B)$15.00
C)$18.75
D)$20.10
E)$20.00

Question

Answer the following question(s)using the information below.Gabe's Auto produces and sells an auto part for $30.00 per unit.In 2012, 100,000 parts were produced and 75,000 units were sold.Other information for the year includes:
 
-What is the inventoriable cost per unit using absorption costing?
A)$14.25 
B)$15.00 
C)$18.75 
D)$20.10 
E)$20.00

Quizplus · Accepted Answer

To determine inventoriable cost per unit using absorption costing, we need to take into account all manufacturing costs, including direct materials, direct labor, and factory overhead.

Manufacturing costs per unit:
Direct materials + Direct labor + Factory overhead = Total manufacturing costs

Based on the information given, we know that revenue from sales was $2,250,000 (75,000 units x $30.00). We also know that 100,000 units were produced, so we can calculate the per unit cost of goods sold (COGS) using variable costing: 
Variable cost per unit = Total variable costs / Units sold
Variable cost per unit = (Revenue - Total variable expenses) / Units sold
Variable cost per unit = ($2,250,000 - 750,000) / 75,000
Variable cost per unit = $15.00

To calculate the per unit inventoriable cost using absorption costing, we need to add the fixed factory overhead to the variable cost per unit: 
Inventoriable cost per unit = variable cost per unit + fixed factory overhead per unit
Fixed factory overhead per unit = Total fixed factory overhead / Units produced
Fixed factory overhead per unit = $375,000 / 100,000
Fixed factory overhead per unit = $3.75
Inventoriable cost per unit = $15.00 + $3.75
Inventoriable cost per unit = $18.75

Therefore, the correct answer is C.

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