Cool Sky reports the following costing data on its product for its first year of
ID: 2553353 • Letter: C
Question
Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 46,000 units and sold 38,000 units at a price of $120 per unit. Manufacturing costs Direct materials per unit Direct labor per unit Variable overhead per unit Fixed overhead for the year 4 8 18 $460,000 s 11 Selling and administrative costs Variable selling and administrative cost per unit Fixed selling and administrative cost per year $115,000 Exercise 6-9 Part 1a 1a. Assume the company uses absorption costing. Determine its product cost per unit. Per unit product cost using Absorption costing Cost per unitExplanation / Answer
1a.
1b.
2a.
2b
Notice that the fixed manufacturing overhead cost has not been included while computing the cost of one unit under variable costing system.
Selling and administrative expenses (both variable and fixed) are not relevant for the computation of unit product cost.
Cost per unit Absorption costing Direct material cost $ 48 Direct Labour $ 18 Variable manufacturing overhead $ 6 Fixed Manufacturing overhead ($460,000/46,000) $ 10 Cost per unit $ 82