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Chapter 16: Q18RQ (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 is 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.

Unit product cost = Cost of goods manufactured/Total Units produced

UnitProductCost=TotalcostofGoodsManufacturedTotalUnitsProduced

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Most popular questions from this chapter

Computing cost of goods sold, merchandising company

Use the following information for The Windshield Helper, a retail merchandiser of auto windshields, to compute the cost of goods sold:

Web Site Maintenance $ 7,900

Delivery Expense 400

Freight In 2,400

Purchases 47,000

Ending Merchandise Inventory 5,500

Revenues 63,000

Marketing Expenses 10,700

Beginning Merchandise Inventory 8,600

List six differences between financial accounting and managerial accounting.

Describe a merchandising company, and give an example.

Explain the differences between planning, directing, and controlling.

Preparing an income statement and calculating unit cost for a merchandising company

Dillon Young owns Dillon’s Pets, a small retail shop selling pet supplies. On December 31, 2018, the accounting records for Dillon’s Pets showed the following:

Merchandise Inventory on December 31, 2018 $ 10,500

Merchandise Inventory on January 1, 2018 16,000

Net Sales Revenue 56,000

Utilities Expense for the shop 3,200

Rent for the shop 4,100

Sales Commissions 2,750

Purchases of Merchandise Inventory 25,000

Requirements

1. Prepare an income statement for Dillon’s Pets for the year ended December 31, 2018.

2. Dillon’s Pets sold 5,550 units. Determine the unit cost of the merchandise sold, rounded to the nearest cent.
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