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The manufacture of a product is expected to involve the following costs
Fixed Variable
Raw materials – $7.50 per unit produced
Direct labour – $5.00 per unit produced
Factory overheads $500,000 $2.50 per unit produced
Selling and administration costs $200,000 $2.50 per unit sold
Sales price
$50 per unit sold
If normal activity is 50,000 units produced and sold, what is the absorption cost of a unit of finished goods inventory?see here i had calculated
50000/50=1000units
then factory o/h =$500000/1000=$500
so, now for absorption cost per unit calculation we add dm +dl+var cost+factory cost (500/50)why?
i could nt understand it why they do 50000/50 i am wrong pls explain
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