Murphy Inc., which produces a single product, has provided the following data for its most recent month of operation:
Number of units produced | 7,000 | |
Variable costs per unit: | ||
Direct materials | $ | 37 |
Direct labor | $ | 43 |
Variable manufacturing overhead | $ | 5 |
Variable selling and administrative expenses | $ | 1 |
Fixed costs: | ||
Fixed manufacturing overhead | $ | 84,000 |
Fixed selling and administrative expenses | $ | 119,000 |
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.
Absorption Costing | Variable Costing | |
Direct Meterial | $ 37 | $ 37 |
Direct Labour | $ 43 | $ 43 |
Variable Manufactoring Overhead | $ 5 | $ 5 |
Fixed Manufactoring Overhead ($84,000/7,000) | $ 12 | |
Unit Product Cost | $ 97 | $ 85 |
Notice that the fixed manufacturing overhead cost has not been included while computing the cost of one unit under variable costing system.
Selling and administrative expenses (both variable and fixed) are not relevant for the computation of unit product cost.
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Murphy Inc., which produces a single product, has provided the following data for its most recent...
Murphy Inc., which produces a single product, has provided the following data for its most recent month of operation: Number of units produced 7,000 Variable costs per unit: Direct materials $ 86 Direct labor $ 71 Variable manufacturing overhead $ 2 Variable selling and administrative expenses $ 7 Fixed costs: Fixed manufacturing overhead $ 378,000 Fixed selling and administrative expenses $ 98,000 The company had no beginning or ending inventories. Required: a. Compute the unit product cost under absorption costing....
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