Question

Last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units are manufactured next month and cost behavior patterns remain unchanged the:

Answer 1

Answer:

Total cost per unit will decrease.

Explanation:

Solutions:

Variable cost is 0.5 of the total cost

Given that total cost=fc+vc

Find FC since VC is given

Therefore :

1st month cost behavior

$60*0.5 = $30

$300,000/10,000 = $30 (fixed)

2nd month cost behavior

$300,000/10,500 = $28.57(fixed)

Add the different months together

Then have

30+28.57 = 58.57 < 60