When 20,000 units are produced, fixed costs are $16 per unit. Therefore, when 40,000 units are produced fixed costs will:
A)increase to $32 per unit
B)remain at $16 per unit
C)decrease to $8 per unit
D)total $640,000

Question

Quizplus · Accepted Answer

Fixed costs per unit decrease as production increases because the total fixed costs are spread over more units. If fixed costs are $16 per unit for 20,000 units, the total fixed costs are $320,000. When 40,000 units are produced, the fixed costs per unit decrease to $8 ($320,000/40,000 units).

When 20,000 Units Are Produced, Fixed Costs Are $16 Per