CalcuCo hired Effner & Associates to design a new computer-aided manufacturing facility. The new facility was designed to produce 300 computers per month. The variable costs for each computer are $660 and the fixed costs total $74,700 per month. The average cost per unit, if the facility normally expects to operate at eighty-five percent of capacity, is calculated to be (round to nearest cent):
A) $952.94.
B) $909.00.
C) $936.67.
D) $971.25.
E) $942.47.

Question

Quizplus · Accepted Answer

The average cost per unit at eighty-five percent of capacity is calculated by adding the variable cost to the total fixed cost divided by the number of units produced at eighty-five percent capacity. The facility's capacity is 300 computers, so at eighty-five percent capacity, it produces 255 computers (0.85 * 300). The total cost is the sum of the variable costs for 255 computers ($660 * 255 = $168,300) and the fixed costs ($74,700), which equals $243,000. Dividing this total cost by the number of units (255) gives an average cost per unit of $952.94.

CalcuCo Hired Effner & Associates to Design a New Computer-Aided