Question

Bitonti Corporation has provided the following data for its most recent year of operation:

Manufacturing costs:
Variable manufacturing cost per unit produced:
Direct materials	$	9
Direct labor	$	7
Variable manufacturing overhead	$	5
Fixed manufacturing overhead per year	$	156,000
Selling and administrative expenses:
Variable selling and administrative expense per unit sold	$	5
Fixed selling and administrative expense per year	$	81,000

Units in beginning inventory	0
Units produced during the year	12,000
Units sold during the year	11,000
Units in ending inventory	1,000

The unit product cost under absorption costing is closest to:

$39.00

$13.00

$21.00

$34.00

Answer 1

Absorption Costing System

- Product Cost refers to the costs used to fabricate/make/produce a product.

- Under Absorption Costing, product cost includes both fixed and variable manufacturing expenses incurred in fabrication of the product or service.

- It includes cost of direct material used, cost of direct labor, consumable supplies used and manufacturing/factory overheads (both variable as well as fixed factory overhead).

- Product Cost does not include Selling, General and Administrative Expenses.

Calculation of Unit Product Cost

Manufacturing Costs:	$$
Direct materials	$9.00
Direct labor	$7.00
Variable manufacturing overhead	$5.00
Fixed manufacturing overhead per unit (Total OH Costs 156,000 / Units Produced 12,000)	$13.00
Unit Product Cost	$34.00

Hence, the correct option is $34

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