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A company produces 1,000 units of a product at a total variable cost of $5,000.

Practice Questions

Q1
A company produces 1,000 units of a product at a total variable cost of $5,000. What is the marginal cost per unit?
  1. $2.00
  2. $5.00
  3. $3.00
  4. $4.00

Questions & Step-by-Step Solutions

A company produces 1,000 units of a product at a total variable cost of $5,000. What is the marginal cost per unit?
  • Step 1: Identify the total variable cost, which is given as $5,000.
  • Step 2: Identify the number of units produced, which is given as 1,000 units.
  • Step 3: Use the formula for marginal cost per unit, which is Total Variable Cost divided by Number of Units.
  • Step 4: Plug in the values: $5,000 (Total Variable Cost) divided by 1,000 (Number of Units).
  • Step 5: Calculate the result: $5,000 / 1,000 = $5.00.
  • Step 6: The marginal cost per unit is $5.00.
  • Marginal Cost – Marginal cost refers to the additional cost incurred to produce one more unit of a product.
  • Variable Cost – Variable costs are costs that change in proportion to the level of production or sales.
  • Average Cost – Average cost is calculated by dividing total costs by the number of units produced, which can be confused with marginal cost.
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