Question

EB8.

LO 2.2Suppose that a company has fixed costs of $11 per unit and variable costs $6 per unit when 11,000 units are produced. What are the fixed costs per unit when 20,000 units are produced?

Answer 1

The fixed costs per unit when 20,000 units are produced are $6.05 per unit.

Step-by-step explanation:

Fixed costs per unit can be determined by using the following formula:

Fixed costs per unit = Total fixed costs/ number of units are produced

In a company, Total fixed costs do not depend on the level of activity (Fixed costs do not change).

In the company, Total fixed cost = $11 x 11,000 = $121,000

When 20,000 units are produced, Fixed costs per unit = $121,000/20,000 = $6.05 per unit.