Last month, Buren, Inc. manufactured 10,000 units of its only product, and the cost per unit was $60. At this level of production, variable costs are 50% of total unit costs. If 10,500 units are manufactured this month and cost behavior patterns remain unchanged

Question

Justin Montgomery

Business

17 July, 16:35

Last month, Buren, Inc. manufactured 10,000 units of its only product, and the cost per unit was $60. At this level of production, variable costs are 50% of total unit costs. If 10,500 units are manufactured this month and cost behavior patterns remain unchanged

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Answers (1)

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Isaac Price · Answer 1

Consider the following calculations

Explanation:

Fixed Cost = 60*50%*10000 = $300000

Variable Cost per unit = 60*50% = $30 per unit

Previous Total Cost Per Unit = $60 per unit

New Total Cost per unit = Fixed Cost + Variable Cost

= 300000 + (10500*30)

= 300000 + 315000

= $615000

New Total Cost per unit = 615000/10500

= $58.57 per unit

...

Note:-

Fixed cost will remain unchanged irrespective of the increase in the production in units. So total cost per unit decrease. We can see the above effect.