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Under absorption costing a company had the following per unit costs when 10,000 units were produced.
Direct Labor ................................... $2Direct Materials............................. 3Variable Overhad......................... 4Total Variable Cost ................................$9Fixed overhead ($50,000/10,000 units) 5Total production cost per unit................ $14
Required
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?
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