Absorption net income is $3,600 lower, which means that ending inventory decreased and sales were greater than production. To calculate fixed overhead cost per unit, subtract variable production cost per unit from total production cost per unit. Remember that $1 of the total variable costs per unit is variable selling expense. Hence, total variable production costs per unit is $8 ($9 − $1). To compute fixed production costs per unit, subtract the variable cost from the total cost to get $3 per unit ($11 − $8).
The difference between absorption costing and variable costing can then be divided by the fixed overhead cost per unit to determine the decrease in inventory: $3,600 ÷ $3 = 1,200 units.
To calculate the units produced during the year, subtract the decrease in inventory from the total units sold during the year: 10,000 – 1,200 units = 8,800 units produced.
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