Accounting: 1,001 Practice Problems For Dummies
Book image
Explore Book Buy On Amazon

If you know the manufacturing costs of a product, and how many units you have produced and sold, then you can determine the per-unit cost. The following practice questions walk you through the process.

Practice questions

  1. Goody Picnic Tables Inc. has the following per-unit information:

    • Selling price: $450

    • Raw materials used to construct the product: $95

    • Labor to build the product: $75

    • Overhead associated with building the product: $14

    • Sales commission: $25

    • Administrative costs: $12

    The company produced 250 units and sold 240. Calculate the product cost per unit.

  2. Terry Bears Co. produces stuffed animals and sold 5,000 animals last year. The company had the following costs last year to produce 6,000 animals:

    • Fabric used to construct the animals: $30,000

    • Stuffing for the animals: $5,000

    • Depreciation on the sewing machines used to construct the animals: $2,500

    • Depreciation on delivery trucks: $1,500

    • Wages for the workers who sew and stuff the animals: $40,000

    • Wages for salespeople: $13,000

    • Utilities to heat and light the factory and power the sewing machines: $12,000

    • Utilities to heat and light the corporate headquarters: $6,000

    What is the cost per animal?

Answers and explanations

  1. $184

    The total of the manufacturing costs per unit equals the product cost per unit. The material, labor, and overhead are the manufacturing costs from the list.

    image0.png
  2. $14.92

    The first step is to calculate the total manufacturing costs. Manufacturing costs include the direct material, direct labor, variable overhead, and fixed overhead. The fabric and stuffing are direct materials. The wages for the workers who sew and stuff the animals are direct labor. The utilities associated with the factory and sewing machines are considered variable overhead costs. The depreciation on the machines is a fixed overhead cost.

    image1.png

    The second step is to divide the total manufacturing costs by the number of units produced to calculate cost per unit.

    image2.png

If you need more practice on this and other topics from your accounting course, visit Dummies.com to purchase Accounting For Dummies! Featuring the latest information on accounting methods and standards, the information in Accounting For Dummies is valuable for anyone studying or working in the fields of accounting or finance.

About This Article

This article is from the book:

About the book authors:

Kenneth Boyd is the owner of St. Louis Test Preparation (www.stltest.net). He provides online tutoring in accounting and finance. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. He is the author of CPA Exam For Dummies. Kate Mooney has been teaching accounting to both undergraduates and MBA students at St. Cloud State University since 1986, after earning her PhD from Texas A & M University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy.

This article can be found in the category: