Lily's Pastries produces cupcakes, which sell for $5 each. During the current month, Lily produced 2,800 cupcakes, but only sold 2,700 cupcakes. The variable cost per cupcake was $3 and the sales commission per cupcake was $0.50
Total fixed manufacturing costs were $1,400 and total fixed marketing and administrative costs were $1,200. What is the product cost per cupcake under absorption costing?
A) $3.50
B) $5.50
C) $5.00
D) $3.00
A
Explanation: A) Fixed Manufacturing $1,400 divided by production 2,800 = $ .50 per unit fixed cost
Now: Add Variable cost per unit $3 + fixed $.50 = $3.50 product cost
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