Question

Wu Company incurred $97,200 of fixed cost and $111,600 of variable cost when 3,100 units of product were made and sold. If the company's volume increases to 3,600 units (within relevant range), the total cost per unit will be:

Answer 1

The total per cost unit would be 63$ per unit.

Explanation:

Fixed costs are the cost that remains fixed throughout the production cycle whereas the variable cost changes according to the production process.

Hence for the given process while the variable cost would change for producing 3600 units, the fixed cost would remain the same.

The variable cost of producing 3100 units= 111,600$

Variable cost of producing 1 unit= 36$

The cost needed to produce 3600 similar units=129,600$

Fixed cost= 97,200$

Total cost of production= 129,600$+97,200$= 226,800$

Per unit cost of production= Total cost/total no of units produced

=226,800/3600

=63$