Olguin Corporation produces a single product and has the following cost structure: Number of units produced each year 4,000Variable costs per unit: Direct materials$15Direct labor$13Variable manufacturing overhead$7Variable selling and administrative expenses$5Fixed costs: Fixed manufacturing overhead$328,000Fixed selling and administrative expenses$324,000 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 | $ | 15 |
| Direct labor | 13 | |
| Variable manufacturing overhead | 7 | |
| Fixed manufacturing overhead ($328,000 ÷ 4,000 units) | 82 | |
| Unit product cost | $ | 117 |
b.
Variable costing:
| Direct materials | $ | 15 |
| Direct labor | 13 | |
| Variable manufacturing overhead | 7 | |
| Unit product cost | $ | 35 |
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