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25 June, 21:37

Hamilton Company has decided to use variable costing and has identified the following costs: direct materials $5, direct labor $10, variable overhead $3, fixed overhead $2. What is Hamilton Company's total unit cost?

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  1. 25 June, 22:42
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    Unitary cost = $18

    Explanation:

    Giving the following information:

    Hamilton Company has decided to use variable costing and has identified the following costs:

    direct materials $5

    direct labor $10

    variable overhead $3

    The difference between absorption and variable costing is that the first one computes the fixed overhead to the product cost. Under variable costing method, the unitary cost of production is determined by the direct material, direct labor, and variable overhead.

    Unitary cost = direct material + direct labor + unitary variable overhead

    Unitary cost = 5 + 10 + 3 = $18
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