Gore Manufacturing incurred the following costs during the year: direct material

Question

Gore Manufacturing incurred the following costs during the year: direct materials $24 per unit; direct labor $15 per unit; variable manufacturing overhead $18 per unit; variable selling and administrative costs $8 per unit; fixed manufacturing overhead $122,000; and fixed selling and administrative costs $15,000. Gore produced 12,200 units and sold 10,000 units.

Determine the manufacturing cost per unit under (a) absorption costing and (b) variable costing.

Explanation / Answer

Hi,

Please find the answer as follows:

Absorbtion Costing = 24 (Direct Material) + 15 (Direct Labor) + 18 (Variable Manufacturing Overhead) + 122000/12200 (Fixed Manufacturing Overhead Per Unit) = $67 per unit

Variable Costing = 24 (Direct Material) + 15 (Direct Labor) + 18 (Variable Manufacturing Overhead) = $57 per unit

Notes:

1) Selling and Administrative expenses are not relevant in the calculation of manufacturing cost per unit.

2) We use the number of units manufactured to calculate fixed cost per unit.

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects