**Understanding Variable and Absorption Costing****Learning Objective 6.5:** Using this information from Planters, Inc., what is the cost per unit under both variable and absorption costing?The table below provides essential data for calculating costs:| **Item** | **Cost** ||---------------------------------|-------------|| Production | 10,000 units|| Direct materials | $240 || Direct labor | $280 || Variable manufacturing overhead | $100 || Fixed manufacturing overhead | $1,200,000 |### ExplanationIn this exercise, you are provided with production data and various costs connected to manufacturing. Your task is to determine the cost per unit under both variable and absorption costing methodologies.1. **Variable Costing:** - Includes direct materials, direct labor, and variable manufacturing overhead. - Excludes fixed manufacturing overhead.2. **Absorption Costing:** - Includes all manufacturing costs: direct materials, direct labor, variable manufacturing overhead, and a portion of the fixed manufacturing overhead.**Steps to Calculate Cost per Unit:**1. **Under Variable Costing:** - Sum of Direct Materials, Direct Labor, and Variable Manufacturing Overhead per unit. $ \text{Direct Materials} + \text{Direct Labor} + \text{Variable Manufacturing Overhead} $ $ 240 + 280 + 100 = 620 $ - Cost per unit $= \$620$2. **Under Absorption Costing:** - Includes fixed manufacturing overhead, calculated per unit by dividing total fixed overhead by number of units produced. $ \text{Fixed Manufacturing Overhead per unit} = \frac{1,200,000}{10,000} = 120 $ - Sum of Direct Materials, Direct Labor, Variable Manufacturing Overhead, and Fixed Manufacturing Overhead per unit. $ 240 + 280 + 100 + 120 = 740 $ - Cost per unit $= \$740$### Conclusion- **Variable Costing Cost per Unit:** $620- **Absorption Costing Cost per Unit:** $740By understanding these costing methods, businesses can better analyze profitability, make pricing decisions, and manage expenses effectively.

Name: **Understanding Variable and Absorption Costing****Learning Objective
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Description: **Understanding Variable and Absorption Costing****Learning Objective 6.5:** Using this information from Planters, Inc., what is the cost per unit under both variable and absorption costing?The table below provides essential data for calculating cos

Solution: 1) Variable costing Per-Unit Cost per Variable Costing Direct materials per unit $240…

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LO 6.5Using this information from Planters, Inc., what is the cost per unit under both variable and absorption costing? Production Direct materials 10,000 %24 240 Direct labor 280 Variable manufacturing overhead Fixed manufacturing overhead 100 1,200,000

LO 6.5Using this information from Planters, Inc., what is the cost per unit under both variable and absorption costing? Production Direct materials 10,000 %24 240 Direct labor 280 Variable manufacturing overhead Fixed manufacturing overhead 100 1,200,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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