Question

48 Murphy Inc., which produces a single product, has provided the following data for its most recent month of operation:

Number of units produced		8,500
Variable costs per unit:
Direct materials	$	146
Direct labor	$	72
Variable manufacturing overhead	$	11
Variable selling and administrative expenses	$	13
Fixed costs:
Fixed manufacturing overhead	$	408,000
Fixed selling and administrative expenses	$	153,000

The company had no beginning or ending inventories.

Required:

a. Compute the unit product cost under absorption costing.

b. Compute the unit product cost under variable costing.

Answer 1

a) Unit product cost under absorption Costing

Direct material	146
Direct labor	72
Variable manufacturing overhead	11
Fixed manufacturing overhead (408000/8500)	48
Unit product cost	277

b) Unit product cost under Variable Costing

Direct material	146
Direct labor	72
Variable manufacturing overhead	11
Unit product cost	229