During the current period, 20,000 units were produced and 17,000 units were sold. Fixed manufacturing costs incurred amounted to $40,000.
- If variable production costs totaled $100,000, what is the cost per unit using absorption costing?
A) $2.00
B) $5.00
C) $7.00
D) $7.35

Question

Quizplus · Accepted Answer

Under absorption costing, both variable costs and fixed manufacturing costs are included in the cost per unit. The total production cost is the sum of variable production costs ($100,000) and fixed manufacturing costs ($40,000), which equals $140,000. Dividing this total production cost by the number of units produced (20,000 units) gives a cost per unit of $7.00.

During the Current Period, 20,000 Units Were Produced and 17,000