Under Absorption Costing, a Company Had the Following Unit Costs

question 23

Multiple Choice

Under absorption costing, a company had the following unit costs when 8,000 units were produced. $\begin{array}{lr}\text { Direct labor } & \$ 8.50 \text { per unit } \\\text { Direct material } & \$ 9.00 \text { per unit } \\\text { Variable overhead } & \$ 6.75 \text { per unit } \\\text { Fixed overhead }(\$ 60,000 / 8,000 \text { units }) &\underline{ \$ 7.50 \text { per unit }} \\\text { Total production cost } & \underline{\$ 31.75 \text { per unit }}\end{array}$ Compute the total production cost per unit under variable costing if 25,000 units had been produced.

• A)$31.75
• B)$27.25
• C)$26.25
• D)$24.25
• E)$17.50

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Definitions:

Merchandising Company

A type of business that purchases goods in a ready-to-sell condition and earns income by selling these goods to end consumers.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including materials and labor.

Product Costs

Costs that are directly associated with the manufacture of goods, including materials, labor, and manufacturing overhead.

Financial Reporting

Financial reporting involves the disclosure of financial results and related information to various stakeholders about a company's financial health and performance.