AAA Manufacturing Inc, makes a product with the following costs per unit: Direct materials $ 100 Direct labor $ 90 Manufacturing overhead (variable) $ 50 Manufacturing overhead (fixed) $ 110 Marketing costs $ 35 What would be the inventoriable cost per unit under variable costing and what would it be under absorption costing?

$240 and $350

Explanation:

The computation of the inventoriable cost per unit under variable costing and the absorption costing is shown below:

Particulars                         Variable          Absorption    

Direct materials                   $100                  $100    

Direct labor                            $90                   $90    

Variable Overhead per unit    $50                   $50    

Fixed overhead per unit                              $110    

Inventoriable Cost per unit   $240                   $350

Under variable costing we only considered the variable cost i.e direct material, direct labor, and variable manufacturing overhead but under the absorption costing we also considered the fixed manufacturing overhead along with the variable cost

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