Burns Company incurred the following costs during the year: direct materials $23.70 per unit; direct labor $13.10 per unit; variable manufacturing overhead $16.90 per unit; variable selling and administrative costs $12.00 per unit; fixed manufacturing overhead $122,100; and fixed selling and administrative costs $15,000. Burns produced 10,175 units and sold 6000 units. Determine the manufacturing cost per unit under (a) absorption costing and (b) variable costing. (Round answers to 2 decimal places, e. g. 52.75.) Manufacturing cost (a) Absorption Costing $ (b) Variable Costing $

Absorption costing per unit = $65.7

Variable costing = $53.7

Explanation:

Absorption costing is method of costing where overheads are charged to units produced using volume-based bases. e. g machine hours, labour hours e. t. c. Units are valued using full cost per unit

Full cost per unit = Direct material cost + direct labor cost, 100/10,175 units

Manufacturing cost per unit = + Variable manufacturing overhead + Fixed production overhead

fixed manufacturing overhead = $12223.70+13.10 + 16.90 + 12 = $65.7

Variable costing method

Variable costing values units produced using marginal cost.

Manufacturing cost per unit = Direct material cost + direct labor cost + Variable manufacturing overhead

Manufacturing cost per unit = 23.70+13.10 + 16.90 = $53.7