22. Ross Corporation produces a single product. The company has direct materials
ID: 2551690 • Letter: 2
Question
22. Ross Corporation produces a single product. The company has direct materials costs of $8 per unit, direct labor costs of $6 per unit, and manufacturing overhead of $10 per unit. Sixty percent of the manufacturing overhead is for fixed costs. In addition, variable selling and administrative expenses are $2 per unit, and fixed selling and administrative expenses are $3 per unit at the current activity level. Assume that direct labor is a variable cost.
Under absorption costing, the unit product cost is:
4 per unit
$29 per unit
$20 per unit
$26 per unit
Explanation / Answer
Under absorption costing, the unit product cost is=Direct material+Direct labor+Variable manufacturing overhead+Fixed manufacturing overhead
=(8+6+(10*0.4)+(10*0.6))
which is equal to
=$24 per unit.