Murphy Inc., which produces a single product, has provided the following data for its most recent month of operation: Number of units produced 7,700 Variable costs per unit: Direct materials $ 157 Direct labor $ 81 Variable manufacturing overhead $ 3 Variable selling and administrative expenses $ 9 Fixed costs: Fixed manufacturing overhead $ 415,800 Fixed selling and administrative expenses $ 146,300 The company had no beginning or ending inventories. Required: a. Compute the unit product cost under absorption costing. b. Compute the unit product cost under variable costing.

Results are below.

Explanation:

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).

Absorption costing:

Unitary fixed overhead= 415,800 /7,700= $54

Unitary cost= 157 + 81 + 3 + 54

Unitary cost= $295

Variable costing:

Unitary cost= 157 + 81 + 3

Unitary cost= $241

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