Question

Hadrana corporation reports that at an activity level of 5,500 units, its total variable cost is $275,330 and its total fixed cost is $86,240. what would be the average fixed cost per unit at an activity level of 5,600 units? assume that this level of activity is within the relevant range.

Answer 1

Calculation of average fixed cost per unit at an activity level of 5,600 units:

The average fixed cost per unit can be calculated using the following formula:

Average Fixed cost Per unit = Total Fixed Cost / Number of Units

Total Fixed Cost at the level of 5,600 units is given $86,240

Hence, Average Fixed cost Per unit = 86240/5600 = $15.40

So, the average fixed cost per unit at an activity level of 5,600 units is $15.40