Inventory – Example (Lecture 2)

Thank you Chris for wonderful explanation,

I have a question…The production overheads is normally a fixed cost irrespective of number of units produced. Now given that 10,000 units were produced during the year instead of 12,000 units, the apportionment of entire production overhead cost should be for 10,000 units (ie $7.2 per unit). Why are we dividing the cost over 12000 units which has actually not come in existence. I shall appreciate an understanding on same.