A company has the following costs of production for making 1,000 widgets in June:

The "cost per unit" is:
A) £8 per unit under Absorption Costing and £2 per unit under Marginal Costing
B) £8 under Absorption Costing and £7 under Marginal Costing
C) £8 per unit under Marginal Costing and £7 per unit under Absorption Costing
D) £2 per unit under Marginal Costing and £5 per unit under Absorption Costing

Question

A company has the following costs of production for making 1,000 widgets in June:

The "cost per unit" is:
A) £8 per unit under Absorption Costing and £2 per unit under Marginal Costing 
B) £8 under Absorption Costing and £7 under Marginal Costing 
C) £8 per unit under Marginal Costing and £7 per unit under Absorption Costing 
D) £2 per unit under Marginal Costing and £5 per unit under Absorption Costing

Quizplus · Accepted Answer

Absorption Costing includes overheads. The total cost is £8,000 for 1,000 units, so £8 each.Marginal costing, "the cost of making one more", uses the variable or direct costs only - the materials and the labour. So one more widget would cost £7.

A Company Has the Following Costs of Production for Making