Sea Company Reports the Following Information Regarding Its Production Cost

question 17

Multiple Choice

Sea Company reports the following information regarding its production cost:
$\begin{array}{ll}\text { Units produced } & 42,000 \text { units } \\\text { Direct labor } & \$ 35 \text { per unit } \\\text { Direct materials } & \$ 28 \text { per unit } \\\text { Variable overhead } & \$ 17 \text { per unit } \\\text { Fixed overhead } & \$ 105,000 \text { in total }\end{array}$


Compute production cost per unit under absorption costing.

• A) $28.00
• B) $82.50
• C) $80.00
• D) $63.00
• E) $35.00

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Definitions:

Fixed Overhead

Costs that do not change with the level of production activity, such as rent, salaries, and insurance.

Operating Income

Earnings from a company's core business operations, excluding expenses and revenues from non-operational activities like investment income.

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Manufacturing Margin

The difference between the sales revenue of manufactured goods and the direct costs associated with producing them.