Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations,...

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Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations,...

Siren Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2020, the company incurred the following costs.

Variable Costs per Unit
Direct materials		$10.05
Direct labor		$4.62
Variable manufacturing overhead		$7.77
Variable selling and administrative expenses		$5.23

Fixed Costs per Year
Fixed manufacturing overhead		$311,550
Fixed selling and administrative expenses		$281,534

Siren Company sells the fishing lures for $33.50. During 2020, the company sold 81,000 lures and produced 93,000 lures.

Assuming the company uses absorption costing, calculate Siren’s manufacturing cost per unit for 2020. (Round answer to 2 decimal places, e.g. 10.50.)

Manufacturing cost per unit

$

business accounting

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Answer 1

Answer #1

Answer

Manufacturing cost per unit under Absorption costing
=Direct material + Direct Labor + Variable manufacturing overhead + Fixed manufacturing overhead
= $ 10.05 + $ 4.62 + $ 7.77 + ($311550 / 93000 lures)
= 10.05 + 4.62 + 7.77 + 3.35
= $ 25.79 per unit Answer

Variable Costing:

Product Cost under Variable costing includes direct material cost, direct labor cost, and variable manufacturing overhead only.

Fixed manufacturing overhead do not form part of the Product cost.

Absorption Costing:

Product Cost under Absorption costing includes direct material cost, direct labor cost, variable manufacturing overhead AND fixed manufacturing overheads.

>Selling, General and administrative expenses (BOTH Variable and Fixed) DO NOT FORM part of product cost.

Product Cost
Absorption Costing	Variable Costing
Direct material	Direct material
Direct Labor	Direct Labor
Variable manufacturing overhead	Variable manufacturing overhead
Fixed manufacturing overhead applied	-

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Answer 2

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Exercise 6-17 (Part Level Submission) Siren Company builds custom fishing lures for sporting goods stores. In...