Total fixed costs for Herman Enterprises are $200,000. Total costs, both fixed and variable, are $550,000 if 100,000 units are produced. The variable cost per unit is
A) $2.00/unit.
B) $7.50/unit.
C) $3.50/unit.
D) $5.50/unit.

Question

Quizplus · Accepted Answer

To find the variable cost per unit, we need to subtract the fixed cost from the total cost and then divide the result by the number of units produced.

Variable cost per unit = (Total cost – Fixed cost)/Number of units produced
Variable cost per unit = ($550,000 – $200,000)/100,000
Variable cost per unit = $350,000/100,000
Variable cost per unit = $3.50/unit

Therefore, the variable cost per unit is $3.50/unit, and the best choice is C.

Total Fixed Costs for Herman Enterprises Are $200,000