Question

can someone explain why this is the case?

MGT 5 - MANAGERIAL ACCOUNTING PROBLEM 2 GIVEN: VARIABLE COST/UNIT FIXED COSTS/UNIT UNITS 22,500 FIXED COSTS INCREASE BY 25% AT 23,000 UNITS REQUIRED: TOTAL COST PER/UNIT AT 25,000 UNITS 15.00 4.50 19.50 REQUIRED: TOTAL COST PER/UNIT AT 30,000 UNITS ANSWER VC/UNIT FC/UNIT TC/UNIT ANSWER VC/UNIT FC/UNIT TC/UNIT ANSWER 600,000 15.00 3.75 18.75 REQUIRED: TOTAL COSTS AT 32,500 UNITS

Answer 1

Variable cost per unit	=	$             15.00
Fixed cost per unit	=	$               4.00
Units	=	22,500
Total Fixed cost ($4 X 22500 units)	=	$           90,000
Fixed cost will increase by 25% at 23000 units ($90000 X 1.25)	=	$       1,12,500
Case 1:
Total cost per unit at 25000 units
Variable cost per unit will remain same whereas Fixed cost per unit fluctuates depending upon the number of units:
Variable cost per unit	=	$             15.00
Fixed cost per unit ($112500/25000 units)	=	$               4.50
Total cost per unit	=	$             19.50
Case 2:
Total cost per unit at 30000 units
Variable cost per unit	=	$             15.00
Fixed cost per unit ($112500/30000 units)	=	$               3.75
Total cost per unit	=	$             18.75
Case 3:
Total cost at 32500 units
Total Variable cost ($15 X 32500 units)	=	$       4,87,500
Total Fixed cost	=	$       1,12,500
Total cost	=	$       6,00,000

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