Under absorption costing,a company had the following unit costs when 10,000 units were produced:
The total product cost per unit under absorption costing if 25,000 units had been produced would be $11.

Question

Under absorption costing,a company had the following unit costs when 10,000 units were produced:
  The total product cost per unit under absorption costing if 25,000 units had been produced would be $11.

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs, including fixed overhead, in the unit cost calculation. Therefore, as production volume increases, the fixed overhead cost per unit decreases, resulting in a lower total product cost per unit. If the unit cost was $13 when 10,000 units were produced, it is likely that the unit cost would decrease to $11 or lower if 25,000 units were produced.

Under Absorption Costing,a Company Had the Following Unit Costs When