At a production level of 5,600 units a project has total costs of $89,000. The variable cost per unit is $11.20. What is the amount of the total fixed costs if the production level is increased to 6,100 units without increasing the total fixed assets?
A) $24,126
B) $26,280
C) $27,090
D) $27,820
E) $28,626

Question

Quizplus · Accepted Answer

To find the total fixed costs, first calculate the total variable costs at the initial production level of 5,600 units. The variable cost per unit is $11.20, so the total variable costs are $11.20 * 5,600 = $62,720. Subtract this from the total costs at that production level to find the fixed costs: $89,000 - $62,720 = $26,280. Fixed costs do not change with the level of production, so the total fixed costs remain $26,280 even if the production level is increased to 6,100 units.

At a Production Level of 5,600 Units a Project Has