Question

Wu Company incurred $97,200 of fixed cost and $111,600 of variable cost when 3,100 units of product were made and sold.

If the company's volume doubles (within relevant range), the total cost per unit will_____________.

A. Stay the same

B. decrease

C. Double as well

Answer 1

B. decrease

Step-by-step explanation:

Fixed costs are those cost which remains the same, whatever the production or sales level.

Variable costs are those cost which vary with the change in the level of production or sales.

Total cost = $97,200 + $111,600 = $208,800

Before change

Total Cost per unit = $208,800 / 3,100 = $67.35

After change

Volume = 3,100 x 2 = 6,200 units

Total Cost per unit = $208,800 / 6,200 = $33.68

So the total cost per unit is decrease from $67.35 to $33.68.