1) The answer is $12.5
Total costs = Fixed costs + Variable costs
Assuming variable cost per units to be Y, Cost of equations for total costs become:
For may: $8200 = (1000*Y) + Fixed cost
For jan: $3200 = (600*Y) + Fixed cost
By substracting & solving the equations, we get:
$5000 = 400Y
Y = Variable cost per unit = $5000 / 400 = $12.5
2) Fixed manufacturing overheads are classified as period costs under variable costing.
3) When the level of output increases within the relevant range, Fixed cost per unit decreases but the variable cost per unit does not change.
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