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manufactures key chains for college bookstores
manufactures key chains for college bookstores. During 2019, the company had the following costs: Direct materials used $ 31,000 Direct labor $ 18,000 Depreciation - factory equipment $ 2,000 Rent - Factory $ 12,000 Insurance - Factory $ 17,500 Depreciation - Office Equipment $ 750 $ 2,500 Marketing expenses Administrative expenses $ 40,000 35,000 units were produced in 2019. What is the product cost per unite Select one: O a. $ 2.39 b. $ 1.80 O c. $ 2.32 d. $ 2.30
Expert Solution
Answer is as follows:
Correct Option: d. $2.30
1. From the given costs Depreciation - Office equipment, Marketing and Administrative expenses forms part of Period Costs.
2. And all remaining costs forms part of Product Costs(Direct material, Direct Labour and Manufacturing Overheads).
3. Manufacturing Overheads : Expenses which are directly linked to manufacturing process (Depreciation - Factory equipment, Rent - Factory, Insurance - Factory).
Product Costs:
Direct materials used: $31000
Direct labour: $18000
Depreciation - Factory equipment: $2000
Rent - Factory: $12000
Insurance - Factory: $17500
TOTAL:(a) $80500
No. Of Units:(b) 35000
Product Cost per Unit: (a/b) $2.30
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