Units produced and sold: 48,000; Direct materials (3/kg): 298,000; Direct labour (4/hr): 240,000; Fixed selling costs: 150,000; Variable selling costs: 24,000. Fixed production overheads absorbed at 10 per labour hour. What is the total absorption cost per unit?

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SSC Financial and Cost Accounting P-1 QUESTION #6153

Question 1

Units produced and sold: 48,000; Direct materials ($3/kg): $298,000; Direct labour ($4/hr): $240,000; Fixed selling costs: $150,000; Variable selling costs: $24,000. Fixed production overheads absorbed at $10 per labour hour. What is the total absorption cost per unit?

$14.83
$23.71✔️
$26.83
$27.33

Correct Answer Explanation

Option B ($23.71) is correct.

Labour hours = $240,000 ÷ $4 = 60,000 hours

Fixed production overhead = 60,000 × $10 = $600,000

Total production cost = $298,000 + $240,000 + $600,000 = $1,138,000

Absorption cost per unit = $1,138,000 ÷ 48,000 = $23.71

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