Question

Pierce Company had the following costs:

Units produced

500 units Manufacturing costs:

Direct materials

$ 25 per unit Direct labor

45 per unit Variable manufacturing overhead

15 per unit Fixed manufacturing overhead

5,000 per year Selling and administrative costs:

Variable selling and administrative costs

30 per unit Fixed selling and administrative costs

3,200 per year

Calculate the unit product cost using absorption costing and variable costing

Short answer

Answer

Total unit product cost as per variable costing is $85 and $95 as per absorption costing.

Step-by-step solution

Calculation of unit product cost as per variable costing

Particulars	Amount
Direct material	$25
Direct labor	$45
Variable manufacturing overhead	$15
Total unit product cost	$85

Calculation of unit product cost as per absorption costing

Particulars	Amount
Direct material	$25
Direct labor	$45
Variable manufacturing overhead	$15
Fixed manufacturing overhead ($5,000/500)	$10
Total unit product cost	$95