Question

16) margin company has total fixed costs of $360,000 and variable costs of $14 per unit. if the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000, sales will increase from 40,000 to 65,000 units. should margin reduce its per unit sales price and pay for the additional advertising? (support your answer with calculations.)

Answer 1

The total cost per unit will decrease.

The total cost per unit will be decreased when more number of units are produced.

Firstly ,we calculate fixed cost per unit.

Fixed cost per unit = Fixed costs/ New sales produced.

Cost per unit when company has 3600unit of sales= 14700$/3600= 41$cost per unit.

If the company, doubles his sales then the cost per unit is calculated as Fixed cost/No.of sales.

Cost per unit = 131,200$/ 7200

                      = 18.22$ cost per unit.

So, the total cost per unit is calculated as 42.00$+ 18.22$= 59.22$.

Fixed costs are independent of output, therefore regardless of shifts in production volume, the dollar amount incurred is roughly constant. The recurring occurrence of a company's fixed costs results in a predetermined timetable and dollar amount associated with each cost.

Fixed costs are far more predictable and simpler to prepare for in advance because they must be met regardless of how well sales perform and how much is produced. There is little to no link between production output and total fixed costs, in contrast to variable costs, which fluctuate based on output.

To learn more about fixed cost, refer this link.

brainly.com/question/6838514

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