Question

Kings, Inc. manufactures and sells a single product. A partially completed schedule of the company’s total and per unit costs over the relevant range of 30,000 to 50,000 units produced and sold annually is given below. Complete the schedule of the company’s total and unit costs above.

	Units Produced and Sold
	30,000	40,000	50,000
Total Costs:
Variable costs	$180,000	?	?
Fixed Costs	$300,000	?	?
Total Costs	$480,000	?	?
Cost per unit:
Variable Cost	?	$4.50	?
Fixed Cost	?	?	$6.00
Total Cost Per Unit	$16.00	?	?

Extra Credit: What does this table tell you?

Please show work!

Answer 1

30,000 units produced and sold:

Variable Costs = $180,000
Fixed Costs = $300,000

Variable Cost per unit = Variable Costs / Number of units produced and sold
Variable Cost per unit = $180,000 / 30,000
Variable Cost per unit = $6.00

Fixed Cost per unit = Fixed Costs / Number of units produced and sold
Fixed Cost per unit = $300,000 / 30,000
Fixed Cost per unit = $10.00

40,000 units produced and sold:

Variable Cost per unit = $6.00
Fixed Costs = $300,000

Variable Costs = Variable Cost per unit * Number of units produced and sold
Variable Costs = $6.00 * 40,000
Variable Costs = $240,000

Fixed Cost per unit = Fixed Costs / Number of units produced and sold
Fixed Cost per unit = $300,000 / 40,000
Fixed Cost per unit = $7.50

50,000 units produced and sold:

Variable Cost per unit = $6.00
Fixed Costs = $300,000

Variable Costs = Variable Cost per unit * Number of units produced and sold
Variable Costs = $6.00 * 50,000
Variable Costs = $300,000

Fixed Cost per unit = Fixed Costs / Number of units produced and sold
Fixed Cost per unit = $300,000 / 50,000
Fixed Cost per unit = $6.00

This table tells about the expected total costs at different level of production and cost per unit can be controlled by producing more number of units.