Clark International produces designer watches.Each watch requires materials worth $14.50 and three direct labor hours.The company pays its production supervisor a salary of $500 per week.Hourly wage rate at Clark is $5.If 25 watches are produced in a week,what is the fixed cost per watch?

Question

Quizplus · Accepted Answer

Fixed costs are the expenses that do not vary with the level of production. In this case, the fixed costs would include the production supervisor's salary, which is $500 per week.

To calculate the fixed cost per watch, we need to divide the total fixed cost ($500) by the number of watches produced (25).

Fixed cost per watch = Total fixed costs / Number of watches produced 
Fixed cost per watch = $500 / 25 
Fixed cost per watch = $20

Therefore, the best choice is (C) $20.00 as the fixed cost per watch.

Clark International Produces Designer Watches