Fahey Company manufactures a single product that it sells for $25 per unit. The company has the following cost structure: There were no units in beginning inventory. During the year, 18,000 units were produced and 15,000 units were sold.
-Under absorption costing,the unit product cost is:
A)$9
B)$12
C)$13
D)$16

Question

Fahey Company manufactures a single product that it sells for $25 per unit. The company has the following cost structure:  There were no units in beginning inventory. During the year, 18,000 units were produced and 15,000 units were sold.
-Under absorption costing,the unit product cost is:
A)$9 
B)$12 
C)$13 
D)$16

Quizplus · Accepted Answer

Under absorption costing, the unit product cost includes both variable and fixed manufacturing costs. Based on the given information, the unit product cost would be calculated as follows:

Direct materials per unit = $4
Direct labor per unit = $2
Variable manufacturing overhead per unit = $1
Fixed manufacturing overhead per unit = $6

Total unit product cost = $4 + $2 + $1 + $6 = $13

Therefore, the best choice is C, with a unit product cost of $13.

Fahey Company Manufactures a Single Product That It Sells for $25