Total fixed costs for Threads Company are $80,000. Total costs, both fixed and variable, are $170,000 if 125,000 units are produced. The fixed cost per unit at 100,000 units would be
A) $1.70/unit.
B) $0.90/unit.
C) $2.50/unit.
D) $0.80/unit.

Question

Quizplus · Accepted Answer

To calculate the fixed cost per unit, first we need to find the variable cost per unit:

Variable cost per unit = (Total costs - Total fixed costs) / Number of units produced 
Variable cost per unit = ($170,000 - $80,000) / 125,000 units 
Variable cost per unit = $0.80/unit

Now we can calculate the fixed cost per unit at 100,000 units:

Fixed cost per unit = Total fixed costs / Number of units produced 
Fixed cost per unit = $80,000 / 100,000 units 
Fixed cost per unit = $0.80/unit

Therefore, the correct answer is D.

Total Fixed Costs for Threads Company Are $80,000