Total fixed costs for Threads Company are $80,000.Total costs,both fixed and variable,are $170,000 if 125,000 units are produced.The fixed cost per unit at 100,000 units would be:
A)$1.70/unit.
B)$0.90/unit.
C)$2.50/unit.
D)$0.80/unit.

Question

Quizplus · Accepted Answer

To calculate fixed cost per unit, we need to subtract the total variable cost from the total cost at 125,000 units:

Variable Cost = Total Cost - Fixed Cost
Variable Cost = $170,000 - $80,000
Variable Cost = $90,000

Average Fixed Cost per Unit = Fixed Cost / Number of Units
Average Fixed Cost per Unit = $80,000 / 100,000
Average Fixed Cost per Unit = $0.80/unit

Total Fixed Costs for Threads Company Are $80,000