LL Company produces and sells a product that has variable costs of $9 per unit and fixed costs of $200,000 per year.If production decreases from 50,000 to 40,000 units,the total cost per unit will ________.
A) increase by $1
B) increase by $13
C) decrease by $1
D) decrease by $14

Question

Quizplus · Accepted Answer

When production decreases, the fixed costs are spread over fewer units, increasing the fixed cost per unit. The fixed cost per unit increases by $5 ($200,000/40,000 - $200,000/50,000), and the total cost per unit increases by $1 ($5 increase in fixed cost per unit minus $4 decrease in variable cost per unit).

LL Company Produces and Sells a Product That Has Variable