Under absorption costing,a company had the following unit costs when 8,000 units were produced.
$\begin{array}{ll}
\text { Direct labor } & \$ 8.50 \text { per unit } \
\text { Direct material } & \$ 9.00 \text { per unit } \
\text { Variable overhead } & \$ 6.75 \text { per unit } \
\text { Fixed overhead }(\$ 60,000 / 8,000 \text { units) } & \$ 7.50 \text { per unit } \
\quad \text { Total production cost } & \$ 31.75 \text { per unit }
\end{array}$

Compute the total production cost per unit under absorption costing if 30,000 units had been produced.
A) $31.75
B) $27.25
C) $26.25
D) $24.25
E) $17.50

Question

Under absorption costing,a company had the following unit costs when 8,000 units were produced.
$\begin{array}{ll}
\text { Direct labor } & \$ 8.50 \text { per unit } \
\text { Direct material } & \$ 9.00 \text { per unit } \
\text { Variable overhead } & \$ 6.75 \text { per unit } \
\text { Fixed overhead }(\$ 60,000 / 8,000 \text { units) } & \$ 7.50 \text { per unit } \
\quad \text { Total production cost } & \$ 31.75 \text { per unit }
\end{array}$

Compute the total production cost per unit under absorption costing if 30,000 units had been produced.
A) $31.75
B) $27.25
C) $26.25
D) $24.25
E) $17.50

Quizplus · Accepted Answer

Under absorption costing, fixed overhead is spread over the number of units produced. If 30,000 units are produced, the fixed overhead per unit is $60,000 / 30,000 = $2.00. The total production cost per unit is $8.50 (direct labor) + $9.00 (direct material) + $6.75 (variable overhead) + $2.00 (fixed overhead) = $26.25.

Under Absorption Costing,a Company Had the Following Unit Costs When