Question

Total fixed costs for Randolph Manufacturing are $764,000. Total costs, including both fixed and variable, are $1,030,000 if 200,000 units are produced. The fixed cost per unit at 208,500 units would be closest to____________.

Answer 1

To find the fixed cost per unit at 208,500 units, subtract the variable cost per unit from the total cost per unit. First, find the variable cost at 200,000 units by subtracting the fixed cost from the total cost. Then, use the formula to find the fixed cost per unit at 208,500 units.

Step-by-step explanation:

The fixed cost per unit at 208,500 units can be calculated by subtracting the variable cost per unit from the total cost per unit.

To find the variable cost per unit, we need to find the variable cost at 200,000 units, since it is given that the total cost at 200,000 units is $1,030,000.

The variable cost at 200,000 units can be calculated by subtracting the fixed cost from the total cost.

Variable cost at 200,000 units = Total cost at 200,000 units - Fixed cost

Variable cost at 200,000 units = $1,030,000 - $764,000 = $266,000

Now, to find the fixed cost per unit at 208,500 units, we use the following formula:

Fixed cost per unit at 208,500 units = Fixed cost + Variable cost at 200,000 units / number of units at 200,000 units x number of units at 208,500 units

Fixed cost per unit at 208,500 units = $764,000 + $266,000 / 200,000 x 208,500 = $4.035