Total production costs for Gallop, Inc. are budgeted at £230,000 for 50,000 units of budgeted output and at £280,000 for 60,000 units of budgeted output. Because of the need for additional facilities, budgeted fixed costs for 60,000 units are 25% more than budgeted fixed costs for 50,000 units. How much is Gallop's budgeted variable cost per unit of output

Question

Quizplus · Accepted Answer

The variable cost per unit can be calculated by finding the change in total costs divided by the change in units. The change in cost is £280,000 - £230,000 = £50,000, and the change in units is 60,000 - 50,000 = 10,000 units. Therefore, the variable cost per unit is £50,000 / 10,000 = £5.00.

Total Production Costs for Gallop, Inc