Question

Wu Company incurred $44,200 of fixed cost and $54,600 of variable cost when 2,100 units of product were made and sold.

If the company's volume increases to 2,600 units (within relevant range), the total cost per unit will be:

$17.00.

$21.00.

$43.00.

$38.00.

Answer 1

Correct Option ---- $43

Calculations and Explanations

Present cost details
		Total
(A)	Variable cost	$ 54,600.00
(B)	Number of Units	2,100
(A/B)	variable Cost per Unit	$          26.00
	Fixed cost	$ 44,200.00

Cost per Unit
(A)	Number of Units	2600
(B)	Variable cost per Unit	$            26.00
C=(AxB)	Total Variable cost	$    67,600.00
(D)	Fixed Cost	$    44,200.00
E=(C+D)	Total Cost	$ 111,800.00
(E/B)	Cost per Unit	$            43.00

Fixed cost in total does not change with change in units produced within the relevant range.

Variable cost on the other hand remains same on per unit basis but increase when volume increases and Decrease when volume decreases.