Question

Under absorption costing, a company had the following unit costs when 10,000 units were produced:DL: $2 per unitDM: $3 per unitVOH: $4 per unitTot Variable: $9 per unitFixed OH: $5 per unitTot PC: $14 per unitThe total product cost per unit under absorption costing if 25,000 units had been produced would be $11A. TrueB. False

Answer 1

A.- TRUE

Step-by-step explanation:

Under absorption costing the fixed cost are distribute over the units produced:

With the current production and unit fixed overhead we can determinate the total fixed cost:

`$$Unit Produced * Units Fixed OH = Total Fixed Cost\\\\10,000 * 5 = 50,000`

Now If the Amount produced increase to 25,000 the unit fixed overhead will change:

`(TotalFixedCost)/(Unit Produced)= Unit Fixed MO\\\\(50,000)/(25,000)= 2`

And with that a new total unit cost:

`Unit cost = Variable Cost + Fixed Cost\\9 + 2 = 11`

The statment is TRUE