Q18RQ - Horngren'S Financial And Managerial Accounting

Question

How does a manufacturing company calculate unit product cost?

Step-by-Step Solution

Answer

The unit product cost is calculated using the formulae which is the cost of goods manufactured is divided by the total units produced

Step 1: Definition of Manufacturing Company

A manufacturing company is defined as a company or business organization that converts raw materials into finished goods using labor, and equipment.

Step 2: Calculation of unit product cost

The unit product cost is computed using the cost of goods manufactured. The formula to calculate the unit product cost is the cost of goods manufactured divided by the total units produced.

Unit product cost = Cost of goods manufactured/Total Units produced

$\mathrm{UnitProductCost}=\frac{\mathrm{Total} \mathrm{cost} \mathrm{of} \mathrm{Goods} \mathrm{Manufactured}}{\mathrm{Total} \mathrm{Units} \mathrm{Produced}}$