Question

The following information is available, for product # 101, for Ray Smith Company for the month of January:
Number of units manufactured	145,000
Selling price per unit	$35				$35.00
Direct materials cost incurred	$1,885,000				$13.00
Direct labor cost incurred	$841,000				$5.80
Fixed manufacturing overhead	Allocated to each unit at 60% of DL cost				$3.48
Variable manufacturing overhead	Allocated to each unit at 50% of DL cost				$2.90
Sales commision	6% of selling price				$2.10
Administration costs	$959,900				$6.62
Marketing costs	$479,950				$3.31
What is the inventoriable cost per unit of product # 101?

	A.	$27.28
	B.	$25.18
	C.	$33.90
	D.	$37.21
	E.	$22.28

Answer 1

The correct option is E) $22.28 because the inventoriable cost include direct materials, direct labor, freight in, and manufacturing overhead (other than variable overhead) . SO the calculation is : Direct material cost incurred+Direct labor cost incurred+Fixed manufacturing overhead=$22.28. The Variable manufacturing overhead is not included. The sales commission, administartive expenses and marketing costs are also not included. Inventoriable costs, also known as product costs, refer to the direct costs associated with the manufacturing of products for revenue generation. Often, inventoriable costs include direct labor, direct materials, factory overhead, and freight-in.