Sheddon Industries produces two products. The products' identified costs are as follows: Product A Product B Direct materials $ 20,000 $ 15,000 Direct labor 12,000 24,000 The company's overhead costs of $54,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product B?

Answer: $15

Explanation:

Given the following;

Direct material cost for product B = $ 15,000

Direct labor cost for product B = $24,000

Direct labor for product A = $12,000

Allocated overhead based on direct labor cost = $54,000

Number of units of product B produced = 5000

Total product cost B = Direct labor cost of product B + Direct material cost of product B + overhead cost of product B

Overhead cost of product B based on direct labor cost = company's allocated overhead * (direct labor cost of product B : Total direct labor cost of product A and B)

Total direct labor cost of product A and B = $12,000 + $24,000 = $36,000

Overhead cost of product B based on direct labor cost = $54,000 * ($24,000 / $36,000)

=$36,000

Total product cost B = $24,000 + $15,000 + $36,000 = $75,000

Therefore cost per unit if product B = Total costing of product B : Number of units produced

= $75,000 : 5000 = $15

The cost per unit for product B is $ 15 per unit

Explanation:

Only Manufacturing Costs are used in Product Costing. Thus to find the Cost Per Unit of Product B, we Prepare a Manufacturing Cost Summary for Product B.

Step 1 Prepare a Manufacturing Cost Summary for Product B

Direct materials $ 15,000

Direct labor $24,000

Overhead costs ($24,000/$36,000) * $54,000 $36,000

Total Cost for Product B $75,000

Step 2 Calculate the Cost Per Unit for Product B

Cost Per Unit = Total Cost / Number of Units Produced

= $75,000 / 5,000 units

= $ 15 per unit