Final answer:
The price that includes all costs plus overhead and profit for one unit of work is known as the Unit Price or Cost per Unit. Overhead costs refer to fixed expenses, and 'spreading the overhead' means allocating those costs over an increasing number of units, resulting in a lower average cost per unit.
Step-by-step explanation:
The price that includes all labor, material, and equipment costs for one unit of work, in addition to the contractor's overhead and profit, is commonly referred to as the Unit Price or Cost per Unit. When calculating this cost, we take into account different technological solutions and variable labor costs.
For example, using the information provided:
- Technology 1: Labor Cost ($900) + Cost of Machine ($90) = $990
- Technology 2: Labor Cost ($630) + Cost of Machine ($90) = $720
- Technology 3: Labor Cost ($270) + Cost of Machine ($90) = $360
Moving on to overhead costs, the term overhead refers to the ongoing business expenses not directly attributed to creating a product or service. It's the cost that does not change in proportion to the level of goods or services that the company produces. To determine the average fixed cost, we divide the total fixed cost by the quantity of output produced. If the fixed cost is $1,000, then the average fixed cost curve would exhibit a downwards slope, representing the effect of 'spreading the overhead,' giving a lower average fixed cost as output increases.