In: Accounting
An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labour to produce its total output of 640 u nits. Each unit of capital costs $10, each unit of raw materials, $4, and each unit of labour, $3.The per unit cost of production in this economy is:_______
A) $1.00.
B) $.10.
C) $.05.
D) $.50.
Explanation: All the cost used in the production process is called production cost.
Capital cost = Units x Cost per unit = 2 x $10 = $20
Raw Material cost = Units x Cost per unit = 5 x $4 = $20
Labor cost = Units x Cost per unit = 8 x $3 = $24
Total Cost = Capital cost + Raw Material cost + Labor cost Total Cost = $20 + $20 + $24 = $64
Cost per unit = Total cost / Number of units = $64 / 640 = $0.10
B) $.10.