Question

Owens sells computers. He purchases the computers for $500 each and incurs $8,000 in fixed operating expenses each month. The average cost per unit is:a.$580 if Owens makes and sells 100 units of product.b.$660 if Owens makes and sells 50 units of product. c.$820 if Owens makes and sells 25 units of product. d.All of the answers are correct.

Answer 1

Answer:

correct option is d.All of the answers are correct

Explanation:

given data

purchases computers = $500

fixed operating expenses = $8000

solution

when unit sold = 100

then Purchase cost will be

Purchase cost  = 500 × 100

Purchase cost  = 50000

so total cost is = 5000 + 8000 = 58000

so cost per unit  is

cost per unit = $\frac{58000}{100}$ = $580

and

when units are sold = 50

then   Purchase cost will be

Purchase cost  = 500 × 50

Purchase cost  =25000

and Total Cost will be

Total Cost = 25000 + 8000 = 33000

so Cost per unit will be

Cost per unit = $\frac{33000}{50}$  =  $660

and

when units are sold = 25

then   Purchase cost will be

Purchase cost  = 500 × 25

Purchase cost  =12500

and Total Cost will be

Total Cost = 12500 + 8000 = 20500

so Cost per unit will be

Cost per unit = $\frac{20500}{25}$ = $820

so correct option is d.All of the answers are correct