Question

For each total fixed cost listed below, determine the fixed cost per unit when sales are 50, 100, and 200 units Store rent Manager's salary Equipment lease Depreciation on fixtures 4,000 3,000 2,000 1,250 Begin by calculating the fixed cost per unit for each of the fixed costs listed, and the total fixed cost per unit when sales are 50 units. Then calculate the fixed cost per unit and the total fixed cost per unit when sales are 100 and 200 units, respectively. (Round all amounts to the nearest cent.) Fixed Cost per Total Fixed Cost Store rent Manager's salary Equipment lease Depreciation on fixtures Total fixed cost per unit Unit at 50 Units 4,000 3,000 2,000 1,250

Answer 1

To determine the fixed cost per unit and total fixed cost per unit at different levels of sales.

We need to use the following formula:

Fixed Cost per Unit = Total Fixed Cost / Sales Volume

Total Fixed Cost per Unit = Fixed Cost per Unit

• For sales volume of 50 units:

Fixed Cost per Unit:

Store rent = $80 ($4,000 / 50)

Manager's salary = $60 ($3,000 / 50)

Equipment lease = $40 ($2,000 / 50)

Depreciation on fixtures = $25 ($1,250 / 50)

Total Fixed Cost per Unit:

Store rent = $80

Manager's salary = $60

Equipment lease = $40

Depreciation on fixtures = $25

• For sales volume of 100 units:

Fixed Cost per Unit:

Store rent = $40 ($4,000 / 100)

Manager's salary = $30 ($3,000 / 100)

Equipment lease = $20 ($2,000 / 100)

Depreciation on fixtures = $12.50 ($1,250 / 100)

Total Fixed Cost per Unit:

Store rent = $80

Manager's salary = $60

Equipment lease = $40

Depreciation on fixtures = $25

• For sales volume of 200 units:

Fixed Cost per Unit:

Store rent = $20 ($4,000 / 200)

Manager's salary = $15 ($3,000 / 200)

Equipment lease = $10 ($2,000 / 200)

Depreciation on fixtures = $6.25 ($1,250 / 200)

Total Fixed Cost per Unit:

Store rent = $80

Manager's salary = $60

Equipment lease = $40

Depreciation on fixtures = $25

Note that the total fixed cost per unit remains constant at each level of sales, while the fixed cost per unit decreases as the sales volume increases.