Question

Grover Company has the following data for the production and sale of 2,500 units. Sales price per unit $ 950 per unit Fixed costs: Marketing and administrative $ 625,000 per period Manufacturing overhead $ 300,000 per period Variable costs: Marketing and administrative $ 40 per unit Manufacturing overhead $ 70 per unit Direct labor $ 130 per unit Direct materials $ 250 per unit What is the full cost per unit of making and selling the product?

Answer 1

Answer:

Under Variable costing 490

Under absorption costing 860

Explanation:

If Grover use variable costing:

DM 250

DL 130

FO 70

S&A 40

Variable cost 490

If Grover use absorption cost:

The fixed cost will be include for the unit cost as well.

S&A           625,000

Overhead 300,000

Total fixed 925,000

The fixed Cost will be distribute among the 2,500 units produced

925,000/2,500 = 370

Lastly, variable and fixed are added for total unit cost

Fixed + Variable = 370 + 490 = 860