Abdol 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) $38
B) $73
C) $44
D) $79

Question

Abdol 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) $38 
B) $73 
C) $44 
D) $79

Quizplus · Accepted Answer

The unit product cost under absorption costing includes both variable and fixed manufacturing costs per unit.

Unit product cost under absorption costing = Total manufacturing costs for the period ÷ Total units produced

Total manufacturing costs = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead
= $60,000 + $36,000 + ($2 x 17,000) + ($8 x 17,000)
= $60,000 + $36,000 + $34,000 + $136,000
= $266,000

Total units produced = Units sold + Ending inventory - Beginning inventory
= 13,000 + 4,000 - 11,000
= 6,000

Unit product cost under absorption costing = $266,000 ÷ 6,000 = $44

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