A company has monthly fixed costs of $112,000.The variable costs are $5.00 per unit.If the sales price of a unit is $20.00 and we sell 8,000 units,the company's average fixed costs per unit will be:
A)$19.00 per unit.
B)$ 5.00 per unit.
C)$14.00 per unit.
D)$15.00 per unit.

Question

Quizplus · Accepted Answer

First, let's calculate the total variable costs:

Variable costs = $5.00 per unit x 8,000 units = $40,000

Now, let's calculate the total costs:

Total costs = Fixed costs + Variable costs 
Total costs = $112,000 + $40,000 = $152,000

Finally, let's calculate the average fixed costs per unit:

Average fixed costs per unit = Fixed costs / Number of units 
Average fixed costs per unit = $112,000 / 8,000 units = $14.00 per unit

A Company Has Monthly Fixed Costs of $112,000