Question

The total production cost for making 20,000units was Rs. 21,000 and the total production cost for making 50,000 were Rs. 34,000. Once production exceeds 25,000 units, additional fixed costs of Rs. 4,000 are incurred.

The full production cost per unit for making 30,000 units is _________.

• A. Re. 0.30
• B. Re 0.68
• C. Re. 0.84
• D. Re. 0.93

Answer 1

The correct option is D Re. 0.93

Total cost of 20000 Units = Rs.21000

Total Cost of 50000 Units = Rs.30000 (excluding the additional fixed cost)

Differential values = 30000 units = Rs.9000

Variable cost per unit = Difference in value/difference in units

= Rs.9000/30000

= Rs.0.30 Per units

Now total cost can be bifurcated as:

Units Total Cost Variable Cost @.30 Fixed Cost

20000 21000 6000 15000

50000 34000 15000 19000

30000 28000 9000 19000

Cost per units for 30000 units= 28000/30000

= Re. 0.93 per unit