Under absorption costing a company had the following per unit costs when 10,000 units were produced.
Direct Labor ................................... $2
Direct Materials............................. 3
Variable Overhad......................... 4
Total Variable Cost ................................$9
Fixed overhead ($50,000/10,000 units) 5
Total production cost per unit................ $14
Requireda
1- Compute the company's total production cost per unit if 25,000 units had been produced.
2- Why might a manager of a company using absorption costing produce more units than can currently be sold?