Q1TI - Horngren'S Financial And Managerial Accounting

Question

Pierce Company had the following costs:

Units                                                                produced

500 units                                     Manufacturing costs:

Direct                                                               materials

$ 25 per unit                                               Direct labor

45 per unit             Variable manufacturing overhead

15 per unit                   Fixed manufacturing overhead

5,000 per year         Selling and administrative costs:

Variable selling and administrative costs

30       per unit Fixed selling and administrative costs

3,200 per year

Calculate the unit product cost using absorption costing and variable costing

Step-by-Step Solution

Answer

Answer

Total unit product cost as per variable costing is $85 and $95 as per absorption costing.

Step 1: Calculation of unit product cost as per variable costing

Particulars	Amount
Direct material	$25
Direct labor	$45
Variable manufacturing overhead	$15
Total unit product cost	$85

Step 2: Calculation of unit product cost as per absorption costing

Particulars	Amount
Direct material	$25
Direct labor	$45
Variable manufacturing overhead	$15
Fixed manufacturing overhead ($5,000/500)	$10
Total unit product cost	$95