Mario company has total fixed costs of $ 550 comma 000. total fixed and variable costs are $ 612 comma 500 at a production level of 215 comma 000 units. the fixed cost per unit at a production level of 300 comma 000 units is

$1.83

Explanation:

Fixed costs are those costs which are not output dependent. Are fixed till certain level of production. It doesn’t depend on the level of activity or output.

$550.000 / 300.000 units = $1.83 fix costs per unit

Total costs are equal to total fixed costs plus total variable costs.

Per unit, the equation is:

Total costs per unit = (total fixed costs / units of production) + unit variable costs.

First scenario

Total costs = total fixed costs + total variable costs.

$612.000 = $550.000 + total variable costs.

Total costs per unit = (total fixed costs / units of production) + unit variable costs

$612.000/215.000 units = ($550.000/215.000) + unit variable costs

$2.84 - $2.56 = unit variable costs

$0.29 = unit variable costs

Second scenario

Total costs  = total fixed costs + (unit variable costs * units of production)

Total costs = $550.000 + ($0.29 * 300.000)

Total costs = $550.000 + $87.000

Total costs = $637.000

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