The Cider Company experienced the following costs in 2011: Direct materials: $2.

Question

The Cider Company experienced the following costs in 2011:

Direct materials: $2.65/unit
Direct Labor: $1.80/unit
Variable manufacturing overhead: $3.25/unit
Variable selling: $1.15/unit
Fixed manufacturing overhead: $94,000
Fixed Selling: $35,000
Fixed Administrative: $10,000

During the year the company manufactured 47,000 units and sold 40,000 units. How much is the average unit product cost using full costing?

$7.70
$9.70
$8.85
$10.85

For full costing, I know that I have to use both variable and fixed, but I am not sure how to make it work. My answers are not like the four choices above.

Explanation / Answer

Full costing is a costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a finished unit of product. Direct Materials = $2.65 Direct Labor = $1.8 Variable Manufacturing Ovehead = $3.25 Fixed Manufacturing Overhead (94000 / 47000) = $2 Average Unit Product Cost in Full Costing = $9.7 Direct Materials = $2.65 Direct Labor = $1.8 Variable Manufacturing Ovehead = $3.25 Fixed Manufacturing Overhead (94000 / 47000) = $2 Average Unit Product Cost in Full Costing = $9.7
Thank you.... Direct Materials = $2.65 Direct Labor = $1.8 Variable Manufacturing Ovehead = $3.25 Fixed Manufacturing Overhead (94000 / 47000) = $2 Average Unit Product Cost in Full Costing = $9.7

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