Question

At a production level of 5,600 units, a project has total costs of $89,000 and a variable cost per unit of $11.20. what is the amount of the total fixed costs?

Answer 1

The amount of the total fixed cost is $26,280.

Given,

Production level - 5,600 units

Total cost - $89,000

Variable cost - $11.20

Total fixed cost - ?

So in order to find the total fixed cost a formula is used,

Total fixed cost = Total costs - Total variable cost × Production units

                          = $89,000 - ($11.20 × 5,600)

                          = $26,280

Hence, the total fixed cost is $26,280.

Total fixed cost is the total amount of money a business must pay in order to keep their operations running regardless of how many products they make or sell. Fixed costs are those which exist even when production is at zero.

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