A company incurs a total cost of $15,000 for producing 1,200 units. If the fixed

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Question: A company incurs a total cost of $15,000 for producing 1,200 units. If the fixed costs are $5,000, what is the variable cost per unit?

Options:

Correct Answer: $8.33

Solution:

Variable cost per unit = (Total cost - Fixed costs) / Number of units = ($15,000 - $5,000) / 1,200 = $8.33

A company incurs a total cost of $15,000 for producing 1,200 units. If the fixed costs are $5,000, what is the variable cost per unit?

A company incurs a total cost of $15,000 for producing 1,200 units. If the fixed costs are $5,000, what is the variable cost per unit?

Step 1: Identify the total cost of producing the units, which is $15,000.
Step 2: Identify the fixed costs, which are $5,000.
Step 3: Calculate the total variable costs by subtracting fixed costs from total costs: $15,000 - $5,000.
Step 4: Perform the subtraction: $15,000 - $5,000 = $10,000.
Step 5: Identify the number of units produced, which is 1,200.
Step 6: Calculate the variable cost per unit by dividing total variable costs by the number of units: $10,000 / 1,200.
Step 7: Perform the division: $10,000 / 1,200 = $8.33.

Total Cost Calculation – Understanding how to differentiate between fixed and variable costs to calculate the variable cost per unit.
Cost Per Unit Analysis – Calculating the cost associated with each unit produced based on total costs and fixed costs.