Roy Corporation produces a single product.During July,Roy produced 10,000 units.Costs incurred during the month were as follows: Under absorption costing,any unsold units would be carried in the inventory account at a unit product cost of:
A)$5.10
B)$4.40
C)$3.80
D)$3.50

Question

Roy Corporation produces a single product.During July,Roy produced 10,000 units.Costs incurred during the month were as follows:  Under absorption costing,any unsold units would be carried in the inventory account at a unit product cost of:
A)$5.10 
B)$4.40 
C)$3.80 
D)$3.50

Quizplus · Accepted Answer

Under absorption costing, both fixed and variable costs are allocated to product costs. The total product cost per unit can be calculated as follows:

Total product cost per unit = (Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead)/Number of units produced

Total product cost per unit = ($1.20 + $2.40 + $0.50 + $0.30)/10,000
Total product cost per unit = $4.40

Therefore, any unsold units would be carried in the inventory account at a unit product cost of $4.40.

Roy Corporation Produces a Single Product