Fahey Company Manufactures a Single Product That It Sells For $\$ 25$

question 19

Multiple Choice

Fahey Company manufactures a single product that it sells for $\$ 25$ per unit. The company has the following cost structure:
$\begin{array}{|l|r|}\hline \text { Variable costs per unit: } & \\\hline \text { Manufacturing } & \$ 9 \\\hline \text { Selling and administrative } & \$ 3 \\\hline \text { Fixed costs in total } & \\\hline \text { Manufacturing } & \$ 72,000 \\\hline \text { Selling and administrative } & \$ 54,000 \\\hline\end{array}$
There were no units in beginning inventory. During the year, 18,000 units were produced and 15,000 units were sold.
-Under absorption costing,what was the unit product cost?

• A) $9.
• B) $12.
• C) $13.
• D) $16.

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Definitions:

Manufacturing Overhead

All costs tied to production that are not direct materials or direct labor.

Indirect Cost

A cost that cannot be easily and conveniently traced to a specified cost object.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated before the period begins based on estimated costs.

Machine-Hours

A measure of the amount of time that a machine is operated, used as a basis for allocating manufacturing overhead.