Murphy Inc., which produces a single product, has provided the following data for its most recent month of operation: Number of units produced 7,000Variable costs per unit: Direct materials$37Direct labor$43Variable manufacturing overhead$5Variable selling and administrative expenses$1Fixed costs: Fixed manufacturing overhead$84,000Fixed selling and administrative expenses$119,000The company had no beginning or ending inventories.Required:a. Compute the unit product cost under absorption costing.b. Compute the unit product cost under variable costing.
What will be an ideal response?
a.
Absorption costing:
| Direct materials | $ | 37 |
| Direct labor | 43 | |
| Variable manufacturing overhead | 5 | |
| Fixed manufacturing overhead ($84,000 ÷ 7,000 units) | 12 | |
| Unit product cost | $ | 97 |
b.
Variable costing:
| Direct materials | $ | 37 |
| Direct labor | 43 | |
| Variable manufacturing overhead | 5 | |
| Unit product cost | $ | 85 |
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