Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 7

Components of Full Costs

Refer to Exercise 2-36.

Required

Compute:

a. Product costs per unit.

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b. Period costs for the period.

Step 1 of 2

a.

Product costs per unit

Products costs are those costs assigned to units of production and recognized when the product is sold. Products costs are assigned to the manufacture of products and recognized for financial reporting when sold. Products cost are also called as manufacturing costs. Product costs include cost of direct material, cost of direct labor, and manufacturing overheads.

We need to find out the products costs from the given information before calculating the product costs per unit.

In the given cost information, products costs include fixed manufacturing overhead, direct materials, variable manufacturing overhead and direct labor. As already mentioned above, product costs includes direct materials, direct labor and manufacturing overheads (both fixed and variable).

Variable costs are given per unit. We need to calculate the fixed manufacturing overhead per unit.

Fixed manufacturing overhead per unit =

= = $30 per unit

Now we calculate the product cost per unit, as follows:

Fixed Manufacturing overhead	$30
Direct materials	$90
Variable manufacturing overhead	$20
Direct labor	$55
Total product cost per unit	$195

The product costs per unit is $195 per unit