Unit product cost under absorption costing method is computed by considering the fixed cost of unit production, where under variable costing method fixed cost of unit product is ommited.
Under absorption costing method Direct material cost, Direct labor cost and fixed cost of unit product is considered. Here variable manufacturing cost is also considered.
Unit product cost under absorption costing method is as following,
Direct material cost 5
Direct labor cost 4
Variable manufacturing overhead cost 1
Fixed manufacturing overhead cost 4
Hence, Under absorption costing unit product cost is 5+4+1+4 or 11
Under absorption costing method Direct material cost, Direct labor cost and fixed cost of unit product is considered. Here variable manufacturing cost is also considered.
Unit product cost under absorption costing method is as following,
Direct material cost 5
Direct labor cost 4
Variable manufacturing overhead cost 1
Fixed manufacturing overhead cost 4
Hence, Under absorption costing unit product cost is 5+4+1+4 or 11