A lawnmower manufacturer computed a cost per unit of $53 by adding together last month's direct labor, direct materials, and manufacturing overhead and dividing that total by the 10,000 units produced last month. (There were no beginning or ending inventories.) If 9,000 units are going to be manufactured this month, we would expect that the:
A) cost per unit will remain the same.
B) cost per unit will decrease.
C) direction of change in unit costs cannot be determined.
D) cost per unit will increase.

Question

Quizplus · Accepted Answer

The cost per unit will increase because the fixed portion of manufacturing overhead will be spread over fewer units, increasing the cost per unit.

A Lawnmower Manufacturer Computed a Cost Per Unit of $53