(Appendix 5A)Prehn Corporation Manufactures and Sells One Product

question 13

Multiple Choice

(Appendix 5A) Prehn Corporation manufactures and sells one product.The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative costs.During its first year of operations, the company produced 36, 000 units and sold 30, 000 units.The company's only product is sold for $251 per unit. Assume that the company uses an absorption costing system that assigns $28 of direct labor cost and $70 of fixed manufacturing overhead to each unit that is produced.The unit product cost under this costing system is:

• A)$81 per unit
• B)$109 per unit
• C)$227 per unit
• D)$179 per unit

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Definitions:

Invoice Cost

The total cost shown on an invoice, comprising the purchase price of goods/services, along with taxes, shipping, and any other fees.

Straight-Line Method

A method of calculating depreciation of an asset, which evenly spreads the cost over its useful life.

Salvage Value

The estimated resale value of an asset at the end of its useful life, used in calculating depreciation expenses.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.