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Factory produces a product with a variable cost of $0.60 per unit. Fixed costs per quarter are $15,000 including rent of $6,000. If more than 20,000 units are produced per quarter, additional space is required which increases the rent by 50%.
What is the total cost per unit of producing 30,000 units in a quarter?
Sir i calculated total cost per unit= 2.1, please correct me if I’m wrong
First 20000 units are done at 21,000 fixed cost the rest 10000 will be at 24000, 50% additional of current rent aka 9000 in total
So for the first 20k unit’s cost is 33,000 and the rest 10k has 30000 cost total 63,000 ÷30000 units=2.1
Your answer is wrong, but why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers.
If they produce 30,000 then the fixed costs will be 15,000 + (50% x 6,000) = $18,000
Therefore the cost per unit = 0.60 + 18,000/30,000 = $1.20
Now i got it, but i thought because after 20000 units our fixed cost increases so i assumed we would deduct stepped fixed cost
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