Farris Company, which has only one product, has provided the following data concerning its most recent month of operations:
-What is the unit product cost for the month under absorption costing?

A)£32
B)£61
C)£37
D)£66

Question

Farris Company, which has only one product, has provided the following data concerning its most recent month of operations:
-What is the unit product cost for the month under absorption costing?

A)£32 
B)£61 
C)£37 
D)£66

Quizplus · Accepted Answer

To calculate the unit product cost for the month under absorption costing, we need to first calculate the total manufacturing cost per unit. 
Total manufacturing cost per unit = Direct materials + Direct labor + Manufacturing overhead per unit

Direct materials = £20 
Direct labor = £12 
Manufacturing overhead per unit = (£70,000 ÷ 5,000 units) = £14

Total manufacturing cost per unit = £20 + £12 + £14 = £46

Now, we need to add the variable selling and administrative expenses per unit to the total manufacturing cost per unit to get the unit product cost under absorption costing.

Variable selling and administrative expenses per unit = £15

Unit product cost under absorption costing = Total manufacturing cost per unit + Variable selling and administrative expenses per unit = £46 + £15 = £61

Therefore, the unit product cost for the month under absorption costing is £61.

Farris Company, Which Has Only One Product, Has Provided the Following