Franconia Florist makes custom floral arrangements. Sales and cost data is available for the current year below. If Franconia Florist were able to increase production and sales by 2,000 units while remaining within its relevant range (not adding extra fixed costs), what would the unit variable cost and unit fixed cost be at 5,000 units?

Question

Franconia Florist makes custom floral arrangements. Sales and cost data is available for the current year below.  If Franconia Florist were able to increase production and sales by 2,000 units while remaining within its relevant range (not adding extra fixed costs), what would the unit variable cost and unit fixed cost be at 5,000 units?

Quizplus · Accepted Answer

Unit Variable Cost at 5,000 units (3,000 units original + 2,000 additional units) = $60,000 ÷ 3,000 units = $20.00 or [($60,000 ÷ 3,000 units) x 5,000 units] ÷ 5,000 units = $20.00; and Unit Fixed Cost at 5,000 units = $80,000 ÷ 5,000 units = $16.00

Franconia Florist Makes Custom Floral Arrangements