Final answer:
The total product cost per unit under variable costing is the sum of direct materials cost, direct labor cost, and variable manufacturing overhead cost. Variable costs change with production levels, while average variable cost is the variable cost per unit and production technology is the method by which inputs are transformed into outputs.
Step-by-step explanation:
The total product cost per unit under variable costing includes all the costs that vary with the output level, namely direct materials, direct labor, and variable manufacturing overhead costs. These costs are accounted for on a per-unit basis and are critical in the calculation of the total cost of production per unit. To determine the total product cost per unit under variable costing, one would add the direct materials cost, direct labor cost, and variable manufacturing overhead cost together for each unit produced.
Variable costs, as indicated by the name, are the costs that change directly with the level of production. For example, if more units of a product are made, the variable costs increase because more materials and labor hours are needed to accommodate the higher production. Conversely, if fewer units are produced, variable costs decrease.
Average variable cost, on the other hand, is calculated by dividing the total variable cost by the quantity of output produced. This gives the variable cost per unit of output. If the firm's average variable cost is lower than the market price of the product, excluding fixed costs, the firm would potentially earn a profit.
Production technology refers to the combination of inputs used by a firm and the processes by technology and labor inputs are transformed into outputs. It is an essential factor in determining the efficiency and cost structure of production.