A company had the following unit costs when 9,000 units were produced: Direct labor at $7.25 per unit; Direct material at $8.00 per unit; Variable overhead at $5.50 per unit; Fixed overhead at ($67,500/9,000 units) $7.50 per unit; and a Total production cost of $28.25 per unit. Under Absorption Costing, what is the total production cost per unit if 25,000 units had been produced?

A. $28.25

B. $23.45

C. $26.25

D. $20.75

E. $15.25

A : $28.25 is the total production cost per unit under Absorption Costing.

Explanation:

The absorption costing method is a costing method that is applied in evaluating inventory which not only covers the cost of materials and labor but including both variable and fixed manufacturing overhead costs also.

Under the absorption costing, the unit product cost is calculated as follows:

Total production cost per unit = Direct materials + Direct labor + Variable overhead + Fixed manufacturing overhead allocated

Total production cost per unit = 8.00 + 7.25 + 5.50 + 7.50

= $28.25

$28.25 is the total production cost per unit under Absorption Costing.