The following data pertain to costs at Summit Company: The fixed cost per unit is
A)$3.75.
B)$15.00.
C)$18.75.
D)$11.25.

Question

The following data pertain to costs at Summit Company:  The fixed cost per unit is
A)$3.75. 
B)$15.00. 
C)$18.75. 
D)$11.25.

Quizplus · Accepted Answer

To find the fixed cost per unit, we need to use the high-low method. From the data given, we can see that when the production level is 1,000 units, the total cost is $30,000. When the production level is 2,000 units, the total cost is $45,000. 
Using the high-low method, we can find the variable cost per unit as:

Variable cost per unit = (Total cost at high level - Total cost at low level)/(High level production - Low level production)
= ($45,000 - $30,000)/(2,000 - 1,000)
= $15 per unit

To find the fixed cost per unit, we need to subtract the variable cost per unit from the total cost equation:

Total cost = Fixed cost + (Variable cost per unit x Production level)

Using the data above, we can find the fixed cost per unit as:

$30,000 = Fixed cost + ($15 per unit x 1,000 units)
Fixed cost = $15,000

Therefore, the fixed cost per unit is $15.00.

The Following Data Pertain to Costs at Summit Company