Question

Under absorption costing a company had the following per unit costs when 10,000 units were produced. Direct labor $ 2 Direct material 3 Variable overhead 4 Total variable cost 9 Fixed overhead ($50,000/10,000 units) 5 Total product cost per unit $ 14 Required: 1. Compute the company’s total product cost per unit if 12,500 units had been produced.

Answer 1

Answer: Total product cost per unit if 12,500 units = $13.

Explanation:

Given that,

Direct labor = $2

Direct material = $3

Variable overhead = $4

Total variable cost = $9

Fixed overhead ($50,000/10,000 units) = $5

Total product cost per unit = $14

Fixed Overhead at 12500 units = $\frac{50000}{12500}$ = $4

∴  Total product cost per unit if 12,500 units = Total variable cost per unit + Fixed Overhead at 12500 units

= 9 + 4

= $13