Pedro Company has total fixed costs of $480,000.Total fixed and variable costs are $600,000 at a production level of 150,000 units.The variable cost per unit at 300,000 units is:
A)the same as at 150,000 units.
B)greater than at 150,000 units.
C)less than at 150,000 units.
D)dependent upon fixed costs per unit.

Question

Quizplus · Accepted Answer

The variable cost per unit is calculated by subtracting the total fixed cost from the total cost at a specific production level and then dividing by the number of units produced at that level. Since the fixed costs do not change between production levels, the variable cost per unit at 300,000 units is the same as at 150,000 units, which is ($600,000 - $480,000) ÷ 150,000 = $1.20 per unit.

Pedro Company Has Total Fixed Costs of $480,000