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Financial & Managerial Accounting
Found in: Page 834
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Vijay Company reports the following information regarding its production costs. Compute its product cost per unit under absorption costing.

Direct material

$10 per unit

Direct labor

$20 per unit

Overhead cost for the year

Variable overhead

$10 per unit

Fixed overhead

$160,000

Unit produced

20,000 units

Product cost per unit under absorption costing is $48.

See the step by step solution

Step by Step Solution

Step 1: Definition of Absorption Costing

The costing method that utilizes or captures all the costs, whether direct or indirect, for determining the product cost is known as absorption costing. It allocates the fixed cost to each unit produced.

Step 2: Calculation of product cost per unit

Particular

Amount $

Direct material

$10

Direct labor

20

Variable overhead

10

8

Cost per unit

$48

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