In calculating the production price per unit, which component represents overhead costs per unit?

• A. Direct material costs
• B. Total labour costs
• C. Total overhead costs divided by number of products made
• D. All of the above

Answer: (C)

Overheads are the indirect costs of production, like rent, utilities, and supervision, that can’t be traced to a single unit. To express these costs per unit, you divide the total overhead by the number of units produced, giving the overhead cost per unit. Direct material costs and total labour costs are direct costs tied to each unit, not overhead, so they don’t represent overhead per unit. Therefore, overhead per unit is found by dividing total overhead by the number of products made.