Question

Gut Bombs sandwich shop pays $5,000 a month in rent space and equipment. It pays each of it 10 workers $2,500 a month and spends $5,000 on food. There are no other production costs. Usually the shop sells 3,500 sandwiches per month for $10 each.Their average fixed cost per month per sandwich, rounded to the nearest penny is?

Answer 1

Fixed cost per units= $2.14

Step-by-step explanation:

Giving the following information:

Rent= $5,000

Direct labor= $2,500

Usually, direct labor is a variable cost that varies with production. In this case, I will consider it a fixed cost.

First, we need to calculate the total fixed costs:

Total fixed cost= 5,000 + 2,5000= 7,500

Now, the fixed cost per unit:

Fixed cost per units= 7,500/3,500

Fixed cost per units= $2.14