Question

Oerther Corporation reports that at an activity level of 5,000 units, its total variable cost is $131,750 and its total fixed cost is $31,200. What would be the average fixed cost per unit at an activity level of 5,200 units? Assume that this level of activity is within the relevant range

Answer 1

Answer:

$6.00

Explanation:

Calculation for Oerther Corporation average fixed cost per unit assuming that the level of activity is within the relevant range

Calculation for fixed cost per unit

Average Fixed cost per unit = Total fixed cost/Unit

Where :

Total fixed cost = 31,200

Unit =5,200

Hence:

Average Fixed cost per unit= 31,200/5,200

Average Fixed cost per unit= $6.00

Therefore Assuming that the level of activity is within the relevant range the Average Fixed cost per unit would be $6.00