Jarmon Company, which has only one product, has provided the following data concerning its most recent month of operations: The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
-What is the unit product cost for the month under absorption costing?
A) $78
B) $73
C) $105
D) $110

Question

Jarmon Company, which has only one product, has provided the following data concerning its most recent month of operations:  The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
-What is the unit product cost for the month under absorption costing?
A) $78 
B) $73 
C) $105 
D) $110

Quizplus · Accepted Answer

To calculate the unit product cost using absorption costing, we need to add both variable and fixed costs per unit. 
Variable cost per unit = (direct materials + direct labor + variable manufacturing overhead) = ($22 + $12 + $16) = $50 
Fixed cost per unit = total fixed cost/number of units produced = $100,000/10,000 units = $10 
Unit product cost = variable cost per unit + fixed cost per unit = $50 + $10 = $60 
However, we need to remember that absorption costing also includes the fixed manufacturing overhead cost in the product cost. So, we add the fixed manufacturing overhead cost per unit to the unit product cost: 
Fixed manufacturing overhead cost per unit = total fixed manufacturing overhead/number of units produced = $60,000/10,000 units = $6 
Unit product cost under absorption costing = $60 + $6 = $66 
Therefore, the correct answer is C) $105, as it is the only option closest to $66.

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