Unit manufacturing cost using FIFO and absorption costing

Steps:

• Materials used: 1,000 units × 4 kg = 4,000 kg; FIFO cost = (2,000 kg × $25) + (2,000 kg ×$28) = $50,000 +$56,000 = $106,000 ($106/unit).
• Direct labor: $42/unit (given for 4 kg/unit).
• Fixed overhead: $850 total / 1,000 units =$0.85/unit.
• Total cost: $106 +$42 + $0.85 =$148.85 ≈ $148/unit.

Why A is correct:

• Absorption costing requires allocating direct materials (via FIFO), direct labor, and fixed overhead to units produced, yielding $148/unit.

Why the others are wrong:

• B: Uses total purchased materials ($134,000) + labor ($42,000) + overhead ($850) / 1,000 =$177 ≈ $176, ignoring ending inventory.
• C: Divides total manufacturing cost ($148,850) by units sold (800) ≈$186 ≈ $185.

Final answer: A