What are the company's variable expenses per unit?

Steeler Corporation is planning to sell 100,000 units for $2.00 per unit and will break even at this level of sales. Fixed expenses will be $75,000. What are the company's variable expenses per unit?

a) $0.75

b) $1.00

c) $1.25

d) $1.10

Solutions

Expert Solution

Calculation of Company's Variable Expenses per unit

Information given in the problem

Break even units = 100,000 units

Selling price per unit = $2

Fixed Cost = $75,000

Break even units = Fixed costs / (Selling price - Variable cost per unit)

Assume variable cost per unit be X

1,00,000 units = $75,000 / ($2 - X)

$2-X = $0.75

X = Variable cost per unit =$1.25

Option c) $1.25 is the correct choice

balaji rao answered 2 years ago

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