Computing unit costs at different levels of production LO₃ Fragrances, Inc. budgeted for 12,000 bottles of product Mystique during the month of May. The unit cost of Mystique was $20, consisting of direct materials,

$7; direct labor, $8; and factory overhead, $5 (fixed, $3; variable, $2).

a. What would be the unit cost if 1 0,000 units were manufactured? (Hint: You must first determine the total fixed costs.)

b. What would be the unit cost if 20,000 units were manufactured?

c. Explain why a difference occurs in the unit costs.