Question

Which of the following is a fixed cost? Multiple Choice A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit when production is 112,000. A cost that is $28.00 per unit when production is 70,000, and $56.00 per unit when production is 112,000.

Answer 1

Choice A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit when production is 112,000

Step-by-step explanation:

Fixed cost is cost that does not vary with production.

It is the same no matter the level of output.

Examples of fixed cost is rent.

To determine which cost is fixed cost, find the total fixed cost.

For choice A : $28.00 × 70,000 = $1,960,000

$17.50 x 112,000 = $1,960,000

The total cost is the same for each unit of output, therefore, choice a is a fixed cost.

For choice B : $28 × 70,000 = $1,960,000

$56.00 x 112,000 = $6,272,000

The total varies, so one can conclude that choice B contains variable cost.

I hope my answer helps you

Answer 2

The fixed cost is: A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit when production is 112,000.

Step-by-step explanation:

A fixed cost is a cost that remains fixed or constant, in total, over any activity level in the short run. Another attribute of the fixed cost is that per unit fixed cost falls as activity level rises. Using this attribute we can say that the cost which is $28 per unit at 70000 units and falls to $17.5 per unit when production increases to 112000 units is the fixed cost.

To support our answer, we can calculate the total cost at both these activity levels:

Total cost = 28 * 70000 = $1960000

Total cost = 17.5 * 112000 = $1960000