The fixed costs per unit are $10 when a company produces 10,000 units of product. What are the fixed costs per unit when 8,000 units are produced?
A) $12.50.
B) $10.00.
C) $8.00.
D) $6.50.
E) $5.50.

Question

Quizplus · Accepted Answer

Fixed costs do not change with the level of production. Therefore, if the total fixed costs are $10 per unit for 10,000 units, the total fixed costs are $100,000. When production decreases to 8,000 units, the total fixed costs remain the same ($100,000), but the fixed cost per unit increases because it is spread over fewer units. $100,000 divided by 8,000 units equals $12.50 per unit.

The Fixed Costs Per Unit Are $10 When a Company