Chapter 21, Problem S21A.23SE

To determine

Absorption Costing method:

Under absorption costing all variable productions costs and fixed manufacturing overhead cost are considered as product costs and all other fixed costs are considered as period costs. The formula for calculation of unit product cost under Absorption Costing method is as follows:

$\text{Unit Product cost = }\frac{\left(\begin{array}{l}\text{(Direct Material + Direct Labor + Variable Manufacturing }\\ \text{Overhead)}\times \text{Units Produced +Fixed Manufacturing overheads }\end{array}\right)}{\text{Units produced}}$

Variable Costing method:

Under variable costing all the variable production costs are considered as product costs and all the fixed costs are considered as period costs. The formula for calculation of unit product cost under Variable Costing method is as follows:

$\begin{array}{l}\text{Unit Product cost = Direct Material Cost per unit + Direct Labor Cost per unit }\\ \text{ +Variable Manufacturing Overhead Cost per unit}\end{array}$

1. Absorption Costing:

To determine:

The unit product cost at different level of productions using the Absorption Costing method

To determine

2. Variable costing method:

To determine:

The unit product cost at different level of productions using the Variable Costing method