Shore Company reports the following information regarding its production cost. $\begin{array}{ll}
\text { Units produced } & 28,000 \text { units } \
\text { Direct labor } & \$ 23 \text { per unit } \
\text { Direct materials } & \$ 24 \text { per unit } \
\text { Variable overhead } & \$ 280,000 \text { in total } \
\text { Fixed overhead } & \$ 94,920 \text { in total }
\end{array}$ Compute production cost per unit under absorption costing.
A)$57.00
B)$60.39
C)$47.00
D)$23.00
E)$24.00

Question

Quizplus · Accepted Answer

Production cost per unit under absorption costing is calculated as follows:

Production cost per unit = (Direct labor per unit + Direct materials per unit + Variable overhead per unit + Fixed overhead per unit)/Units produced

Direct labor per unit = $23
Direct materials per unit = $24
Variable overhead per unit = Total variable overhead/Units produced = $280,000/28,000 = $10
Fixed overhead per unit = Total fixed overhead/Units produced = $94,920/28,000 = $3.39

Therefore, Production cost per unit under absorption costing = ($23 + $24 + $10 + $3.39)/28,000 = $60.39

Hence, the best choice is B.

Shore Company Reports the Following Information Regarding Its Production Cost