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

Question

contestada

Respuesta :

TomShelby TomShelby · Answer 1 · 2019-07-21T03:57:03+02:00

Answer:

A.- TRUE

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:

[tex]$Unit Produced * Units Fixed OH = Total Fixed Cost\\\\10,000 * 5 = 50,000[/tex]

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

[tex]\frac{TotalFixedCost}{Unit Produced}= Unit Fixed MO\\\\\frac{50,000}{25,000}= 2[/tex]

And with that a new total unit cost:

[tex]Unit cost = Variable Cost + Fixed Cost\\9 + 2 = 11[/tex]

The statment is TRUE