Question

ena (Pty) Ltd, which manufactures a single product, has provided the following information for March 2019:

Selling price per unit: R 150

Units in opening inventory: Nil

Units manufactured: 9500

Units sold: 9250



Variable cost per unit:

Direct materials: R 30

Direct labour: R 45

Variable manufacturing overhead: R 18,40

Variable selling and admin: R 13,20

Fixed costs:

Fixed manufacturing overheads: R 97 850

Fixed selling and admin: R 31 500



The unit product costs for March 2019 using the absorption costing method:






R 75


R93,40


R106,60


R103,70

Answer 1

To calculate the unit product cost using the absorption costing method, we need to consider both the variable costs and the fixed manufacturing overheads.

1. **Variable Costs per Unit**:
- Direct materials: R 30
- Direct labour: R 45
- Variable manufacturing overhead: R 18.40

Total Variable Cost per Unit:
\[
\text{Total Variable Cost per Unit} = \text{Direct materials} + \text{Direct labour} + \text{Variable manufacturing overhead}
\]
\[
= 30 + 45 + 18.40 = R 93.40
\]

2. **Fixed Manufacturing Overheads**:
- Total Fixed Manufacturing Overheads = R 97,850
- Total Units Manufactured = 9,500 units

Fixed Cost per Unit:
\[
\text{Fixed Cost per Unit} = \frac{\text{Total Fixed Manufacturing Overheads}}{\text{Total Units Manufactured}}
\]
\[
= \frac{97,850}{9,500} \approx R 10.31
\]

3. **Total Unit Product Cost using Absorption Costing**:
\[
\text{Total Unit Product Cost} = \text{Total Variable Cost per Unit} + \text{Fixed Cost per Unit}
\]
\[
= 93.40 + 10.31 \approx R 103.71
\]

Thus, the unit product cost for March 2019 using the absorption costing method is approximately **R 103.70**.

The correct answer is: **R 103.70**.