Groovelex Inc.has collected the following data for the current year: What is the unit product cost for the current year using absorption costing?
A)$70
B)$65
C)$80
D)$55

Question

Groovelex Inc.has collected the following data for the current year:  What is the unit product cost for the current year using absorption costing?
A)$70 
B)$65 
C)$80 
D)$55

Quizplus · Accepted Answer

In absorption costing, the unit product cost includes both variable and fixed manufacturing overhead costs. We can calculate the unit product cost using the following formula:

Unit product cost = (Total manufacturing cost + Total variable selling and administrative expenses) / Total units produced

Substituting the given values:

Unit product cost = (640,000 + 224,000) / 10,000
Unit product cost = 86

Therefore, the unit product cost using absorption costing is $86, which is closest to option C ($80).