Unit Cost via Absorption Costing

Steps:

• Compute overheads absorbed: 1000 labour hours × $6 per hour =$6000.
• Sum total costs: direct materials $40,000 + direct labour$6000 + overheads $6000 =$52,000.
• Divide by units produced: $52,000 ÷ 5000 units =$10.40 per unit.

Why C is correct:

• Absorption costing requires allocating all manufacturing costs (materials, labour, overheads) to units produced, yielding $10.40 via total cost divided by output.

Why the others are wrong:

• A: Considers only materials cost ($40,000 ÷ 5000 =$8), excluding labour and overheads.
• B: Includes materials and labour but ignores overheads ($46,000 ÷ 5000 ≈$9.20, rounded to $9).
• D: Overstates by possibly misapplying overhead rate to total costs or double-counting elements.

Final answer: C