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Answer
Variable Costs
Per unit Total
If 10,000 units are produced $5 $50,000
If 20,000 units are produced $5 $100,000
If 50,000 units are produced $5 $100,000
Fixed costs
Per Unit Total
$3
$30,000
$1.50 $30,000
$0.60 $30,000
Working notes:
Total fixed cost remain same within the relevant range of output.
If 10,000 units are produced:
Variable cost per unit = $5
Total variable cost = Number of units produced x Variable cost per unit
= 10,000 x $5
= $50,000
Fixed costs per unit = $3
Total fixed costs = Number of units produced x Fixed costs per unit
= 10,000 x $3
= $30,000
If 20,000 units are produced:
Variable cost per unit = $5
Total variable cost = Number of units produced x Variable cost per unit
= 20,000 x $5
= $100,000
Total fixed costs = $30,000
Fixed cost per unit = Total fixed costs/Number of units produced
= $30,000/20,000
= $1.50
If 50,000 units are produced:
Variable cost per unit = $5
Total variable cost = Number of units produced x Variable cost per unit
= 50,000 x $5
= $250,000
Total fixed costs = $30,000
Fixed cost per unit = Total fixed costs/Number of units produced
= $30,000/50,000
= $0.60
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