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To calculate the unit cost of the fixed variable (building rent), divide the total fixed cost ($9000) by the total number produced (1000). The fixed unit cost when 1000 units are sold is $9 (9000 / 1000 = 9), but it changes to $1.125 when 8000 hamburgers are sold (9000 / 8000 = 1.125).
Table 1 ? Unit Costs
1000
Annual Units Sold 6000
Annual Units Sold 8000
Annual Units Sold
Raw Materials
(cost/hamburgers)
Variable cost $.65 $.65 $.65
Building Rent
Fixed cost $9 $1.5 $1.125
Total annual cost must not be confused with unit cost of fixed and variable costs. Table 2 identifies the total annual costs based on units sold...
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