Absorption Costing

Under absorption costing a company had the following per unit costs when 10,000 units were produced.

Direct Labor ................................... $2 

Direct Materials............................. 3

Variable Overhad......................... 4

Total Variable Cost ................................$9 

Fixed overhead ($50,000/10,000 units) 5

Total 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?