A manufacturer reports the following costs to produce 10,000 units in its first year of operations:

Direct materials, $10 per unit

Direct labor, $6 per unit,

Variable overhead, $70,000

Fixed overhead, $120,000.

The total product cost per unit under absorption costing is:

a) $23 per unit.

b) $16 per unit.

c) $35 per unit.

d) $17 per unit.

e) $28 per unit.

Option (C) is correct.

Explanation:

Variable overhead per unit:

= Variable overhead : Total units produced

= $70,000 : 10,000

= $7 per unit

Fixed overhead per unit:

= Fixed overhead : Total units produced

= 120,000 : 10,000

= $12 per unit

Total product cost:

= Direct materials + Direct labor + Variable overhead + Fixed overhead

= 10 + 6 + 7 + 12

= $35 per unit