Vital Industries manufactured 2,400 units of its product Huge in the month of April. It incurred a total cost of $132,000 during the month. Out of this $132,000, $45,700 comprised of direct materials used in the product and the rest was incurred because of the conversion cost involved in the process. Vital had no opening or closing inventory. What will be the total cost per unit of the product, assuming conversion costs contained $10,000 of indirect labor?

a. $55
b. $50
c. $39
d. $35

The cost per unit of a product is the cost for creating one item and it is calculated by diving the total costs of production by the number of units produced. The total costs of production is determine by adding up the costs of the direct materials, the direct labor and the manufacturing overhead used which include for example, indirect labor, indirect materials and utilities.

To determine the cost per unit in this case, we have to consider that the conversion costs include direct labor costs and manufacturing overhead costs and because of that the amount of this cost is included in the total cost of production. According to this:

Total cost per unit= total cost of production/number of units produce

Total cost per unit= $132,000/2,400

Total cost per unit= $55