If fixed costs are $40,000 and total costs are $200,000 at an activity level of 8,000 units, variable costs are approximately:

Question

Quizplus · Accepted Answer

To find variable cost per unit, we can use the formula:

Total cost = Fixed cost + (Variable cost per unit × Activity level)

$200,000 = $40,000 + (Variable cost per unit × 8,000)

$160,000 = (Variable cost per unit × 8,000)

Variable cost per unit = $160,000 ÷ 8,000 = $20 per unit. Therefore, the correct answer is B.

If Fixed Costs Are $40,000 and Total Costs Are $200,000