Alpha Company plans to produce 20,000 units next year. The production budget for

Question

Alpha Company plans to produce 20,000 units next year. The production budget for this level of activity is:

Total Variable Costs $220,000   

Total Fixed costs $230,000   

a. What is the variable cost per unit? (2)

b. What is the fixed cost per unit? (2)

c. What is the total cost per unit? (2)

d. What is the total cost equation? (2)   

e. What is the variable cost per unit if 25,000 units are produced? (2)   

f. What is the fixed cost per unit if 25,000 units are produced? (2)   

g. What is the total cost per unit if 25,000 units are produced? (2)

h. What are total costs if 25,000 units are produced? (2)   

i. Explain the change in the total cost per unit when the number of units produced changed. (4)   

Explanation / Answer

a.220000/20000=11

b.230000/20000=11.5

c.11+11.5=22.5

d..220000+230000

e.220000/25000=8.8

f.230000/25000=9.2

g.8.8+9.2=18

h.220000+230000=450000

i.22.5-18=4.5

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