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Absorption Costing:
In absorption costing, all the costs of production are absorbed by or assigned to all the units of production. In simple words, all the direct costs or
To identify: The correct option.
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Explanation of Solution
Option c., $14 is the correct answer.
Given,
Units produced are 1,000.
Under variable costs:
Direct materials are $3 per unit.
Direct labor is $5 per unit.
Variable overhead is $3 per unit.
Variable selling and administrative is $1 per unit.
Fixed overhead is $3,000 total.
Fixed selling and administrative is $1,000 total.
Absorption Costing | |
Product cost per unit | |
Particulars | Amount per unit ($) |
Direct materials | 3 |
Direct labor | 5 |
Variable overhead | 3 |
Fixed overhead (working note) | 3 |
Product cost per unit | 14 |
Table(1)
Working note:
Calculation of fixed overhead per unit,
Hence, $14 is product cost per unit by absorption costing.
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