Question

Jupiter inc incurred fixed costs of $300,000. Total costs, both fixed and variable, are $500,000 when 59,000 units are produced. It sold 35,000 units during the year. Calculate the variable cost per unit.

Answer 1

Given that Total cost = $500,000

Fixed cost = $300,000

Then variable cost is given by

Variable cost = (Total cost) - ( Fixed cost ) = $500,000 - $300,000 = $200,000

Given that 59,000 units are produced for that variable cost.

that means variable cost of 59000 units = 200000

Then variable cost of 1 unit = 200000/59000= 3.38983050847

Hence answer is approx $3.39 per unit.