Assume a company had the following production costs:
$\begin{array}{ll}
\text { Direct labor } & \$ 20,000 \
\text { Direct material } & \$ 30,000 \
\text { Variable overhead } & \$ 40,000 \
\text { Fixed overhead } & \$ 50,000
\end{array}$

Under absorption costing,the total production cost per unit when 4,000 units are produced would be $22.50.

Question

Assume a company had the following production costs:
 $\begin{array}{ll}
\text { Direct labor } & \$ 20,000 \
\text { Direct material } & \$ 30,000 \
\text { Variable overhead } & \$ 40,000 \
\text { Fixed overhead } & \$ 50,000
\end{array}$
 
Under absorption costing,the total production cost per unit when 4,000 units are produced would be $22.50.

Quizplus · Accepted Answer

Under absorption costing, total production cost includes direct labor, direct material, variable overhead, and fixed overhead. The total cost is $140,000 ($20,000 + $30,000 + $40,000 + $50,000). Dividing by 4,000 units gives a cost per unit of $35.00, not $22.50.

Assume a Company Had the Following Production Costs Under Absorption Costing,the Total Production Cost Per Unit When 4,000