The unit product cost under absorption costing is higher than the unit product cost under variable costing.

Question

Quizplus · Accepted Answer

This is because under absorption costing, fixed manufacturing overhead costs are included in the unit product cost, whereas under variable costing, only variable manufacturing costs are included in the unit product cost. Therefore, if production levels are lower than expected, the fixed manufacturing overhead costs allocated to each unit will be higher, causing the unit product cost under absorption costing to be higher.

The Unit Product Cost Under Absorption Costing Is Higher Than