In January, 5,000 units were manufactured at a unit cost of £5. At this level of activity, variable costs are 40 percent of total unit costs. The following month, the company planned to manufacture 4,500 units. If cost behaviour patterns remain unchanged in February,

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Quizplus · Accepted Answer

The total cost per unit will increase because the fixed costs associated with the production (such as rent, salaries, etc.) will be spread over a smaller number of units, resulting in a higher fixed cost per unit. As the variable costs per unit are 40% of the total cost per unit, and they are not expected to change, the total cost per unit will increase. Therefore, option C is the best choice.

In January, 5,000 Units Were Manufactured at a Unit Cost