Per-Unit Manufacturing Costs — Practice Questions

By Kenneth Boyd, Kate Mooney

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.

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  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.

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

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