Exercise 06-1 Computing unit and inventory costs under absorption costing LO P1 Trio Company reports the following information for the current year, which is its first year of operations.

Direct materials $ 13 per unit

Direct labor $ 20 per unit

Overhead costs for the year

Variable overhead $ 3 per unit

Fixed overhead $ 135,000 per year

Units produced this year 22,500 units

Units sold this year 16,500 units

Ending finished goods inventory in units 6,000 units

Compute the product cost per unit using absorption costing.

Question

Business

Lilian

6 September, 05:54

Exercise 06-1 Computing unit and inventory costs under absorption costing LO P1 Trio Company reports the following information for the current year, which is its first year of operations.

Direct materials $ 13 per unit

Direct labor $ 20 per unit

Overhead costs for the year

Variable overhead $ 3 per unit

Fixed overhead $ 135,000 per year

Units produced this year 22,500 units

Units sold this year 16,500 units

Ending finished goods inventory in units 6,000 units

Compute the product cost per unit using absorption costing.

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Answers (1)

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Bernard Shepard · Answer 1

under absorption unit cost: $42

Explanation:

absorption cost will distribute the fixed cost among the entire production of the period rather than declare period cost like in variable coting system

variable cost:

materials 13

labor 20

overhead 3

Total variable 36

fixed overhead distributed among produced units: 135,000 / 22,500 = 6

Total unit cost: 36 + 6 = 42