Question

If 130,000 units are produced, total costs are 333,000. Total fixed costs for Blue Peace Inc. are 145,000. The variable cost per unit is:

Answer 1

To calculate the variable cost per unit for Blue Peace Inc., subtract the total fixed costs of $145,000 from the total costs of $333,000 to find the total variable costs, then divide by the production level of 130,000 units, resulting in $1.4462 per unit.

Step-by-step explanation:

The student is asking about how to calculate the variable cost per unit for Blue Peace Inc. when given total costs and fixed costs with a production level of 130,000 units. To find the variable cost per unit, we subtract total fixed costs from total costs to determine total variable costs, and then divide by the number of units produced.

Here's the calculation:

• Total Costs = $333,000
• Total Fixed Costs = $145,000
• Total Variable Costs (Total Costs - Fixed Costs) = $333,000 - $145,000 = $188,000
• Variable Cost Per Unit = Total Variable Costs / Number of Units = $188,000 / 130,000 units

The variable cost per unit is thus determined to be $1.4462, rounded to four decimal places.