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5 April, 11:45

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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  1. 5 April, 15:35
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    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.
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