Question

The following data is related to sales and production for Spark Enterprises at a volume of 120,000 units: Total fixed costs: $300,000 Total costs: $450,000 This question has 5 parts, you must answer all 5. Each part is worth .5 points. If Spark makes 75,000 units what is the fixed cost per unit?

Answer 1

$4 per unit

Step-by-step explanation:

Fixed costs are those costs which remains same whatever the level of activity is. I t remains constant and do not change with the change in the level of sales / production.

But fixed cost per unit may change with the change in the activity level. if the production volume increases the per unit fixed cost decreases and if the production volume decreases the per unit fixed cost increases

In this question the fixed cost is $300,000 when the production volume is $120,000

Now Volume is revised and decreased to 75,000 units

Fixed cost per unit = $300,000 / 75,000 units = $4 per unit