Accounting???

Question

accounting???

at a sales volume of 40,000 units, Harry's total fixed costs are $40,000 and total cariable costs are $60,000. The relevant range for this product is 30,000 to 50,000 units.

if Harry were to sell 42,000 unites, the "total expected cost" would be? (the answer is 103,000 but how do u get it)

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if he were to sell 50,000 units, what the "total expected cost per unit" (answer is $2.30, but how?)

Answer 1

The variable cost is $60,000/40,000 units, or $1.50 per unit.  For 42,000 units the cost would be

C = $40,000 + (42,000 units)($1.50/unit)

C = $40,000 + $63000 = $103,000

The "average per unit cost" for 50,000 units would be

c = ($40,000 + (50,000 units)($1.50/unit)) / 50,000

c = ($40,000 + $75000) / 50,000

c = $115,000 / 50,000

c = $2.30 per unit