alleryStart learning →Fixed overhead is $12,000 and 10,000 units are made. Under absorption costing each unit carries:
A$1.20 per unit
B$4.80 per unit
C$8.40 per unit
D$2.60 per unit
Answer & Solution
Correct answer: A. $1.20 per unit
1. Absorption costing spreads fixed overhead across the units made.
2. Divide $12,000 of fixed overhead by 10,000 units.
3. The amount of fixed overhead in each unit is $1.20.
4. Under variable costing that same unit would carry no fixed overhead at all.
_Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 6 'Activity-Based, Variable, and Absorption Costing', sections 6.1-6.5_
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