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Chapter 16: 18RQ (page 885)

How does a manufacturing company calculate unit product cost?

Short Answer

Expert verified

The unit product cost is calculated using the formulae which is the cost of goods manufactured and divided by the total units produced

Step by step solution

01

Definition of Manufacturing Company

A manufacturing company is defined as a company or business organization that converts raw materials into finished goods using labor and equipment.

02

Calculation of unit product cost

The unit product cost is computed using the cost of goods manufactured. The formula to calculate the unit product cost is the cost of goods manufactured divided by the total units produced.

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Most popular questions from this chapter

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

3. Is not required to follow GAAP.

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA): 1. Helps creditors make lending decisions

Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):

4. Has a focus on the future.

Comparing managerial accounting and financial accounting

For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):

d. Reports must follow Generally Accepted Accounting Principles (GAAP).

Determining the flow of costs through a manufacturer’s inventory accounts

True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of \(21,900,000. Of this amount, \)2,600,000 was direct materials used and \(14,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)1,100,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)2,000,000; and Finished Goods Inventory, $1,080,000.

Requirements Analyze the inventory accounts to determine:

1. Cost of direct materials purchased during the year.

2. Cost of goods manufactured for the year.

3. Cost of goods sold for the year.
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